For an LLC, can voting rights be seperate from profit sharing rights?

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For an LLC, can voting rights be seperate from profit sharing rights?

I am a board member for a brand new LLC. The investor wants 40% of the voting rights. The founders want 51% of the voting rights, which only leaves 9% for the rest of us. I am not that concerned with having voting rights but I would like to have at least 10% of the profit sharing. Is this possible?

Asked on April 15, 2012 under Business Law, California

Answers:

Glenn M. Lyon, Esq. / MacGregor Lyon, LLC.

Answered 9 years ago | Contributor

Yes.  However, having different voting and profit sharing percentages will preclude the LLC from being able to elect to be taxed as a Subchapter S corporation.

Madan Ahluwalia / Ahluwalia Law P. C.

Answered 9 years ago | Contributor

Yes. It is all negotable. Those are two different kinds of rights- one will dictate the decision making and other dictates who profits will be divided! Profit sharing will be based on some of the work that might have already been done by a founder (sweat equity) and money investments in the past, etc. Voting rights give control based on investment and will give investors right to control some of those decisions.


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