Partner structure for new LLC

UPDATED: Sep 30, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: Sep 30, 2022Fact Checked

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

Partner structure for new LLC

A manufacturing company overseas wants to sell their products in the US. The owner is a friend of mine and he wants to partner with me to open up an online business. I need to register a US company to do so. We’ve decided that my compensation is 3 of the total sales revenue and he keeps the remaining profit. So my questions is how do I structure the new LLC to reflect this compensation structure. Should I register the LLC under my name only he is ok with this, or a partnership LLC, which we each own an equity share of the company? If it is a 70/30 split in equity, can we still keep the above mentioned compensation structure (i.e. I keep 3 of revenue and he keeps the rest of the profit)?

Asked on August 8, 2017 under Business Law, Colorado


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

LLC's are highly flexible, and ownership, profit/loss participation, and management can also reflect different percentages, so long as they are set forth in the operating agreement. A person can own X%; have Y control over operations; and be paid $Z--and X, Y, and Z do not have to be related; all that's required is that the members (that's what you call LLC owners) agreed to these things.
Structure the agreement to accurately reflect what you have and want: e.g. the equity split; the way profits or other compensation are paid; and how it is managed (e.g. who makes what decisions, how). Also include provisions about what happens if one of you wants out or if there are some irreconcilable differences arising between you--e.g. is there is  mandatory buy out clause (and for how much money) if one person wants out, or if the majority (70%) owner wants to buy out the minority one? 
Any lawyer who does business formation (e.g. sets up LLCs and corporations) can help you structure this exactly as you want. He or she will also know the questions to ask you to make you think about things you should address, but have not considered yet.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption