limited-liability-company partnership
Easiest way to modify LLC control?
<p>I need to create a two member LLC. </p>

<p>Initially the LLC will need to be fully controlled by one person, but in the future control will have to change to be 50/50.</p>

<p>What is the easiest / safest way to accomplish this? </p>

<p>Make one member a 10% owner and the other 90% and then shift to 50/50? </p>

<p>Or do 50/50 ownership at the start and use an operating agreement that specifies 90/10 control and then file a new one to 50/50?</p>

<p>Both partners are happy signing any type of updated operating agreement or form to change ownership from 90/10 to 50/50. Trying to figure out which method is easier.</p>

<p>Thanks in advance!</p>

<p>First - do it all with an operating agreement in writing; always - no exceptions!</p>

<p>Second - what you are describing in fairly simple for any competent lawyer to draft. The voting section of the operating agreement needs to include a provision stating something to the effect that until a Trigger Event occurs, Big Member will have 90% of the voting power of all membership interests; following the Trigger Event, Big Member and Little Member (assuming no other members join the LLC in the interim) will each own 50% of the voting power. The operating agreement (including this provision) is executed at the inception of the LLC, and will be self-executing, that is - when the trigger Event occurs, voting power should automatically shift without the need for any additional action.</p>

<p>Have your lawyer make sure there's no hitch in the applicable state LLC law; that equity interests don't shift on the Trigger Event (that would cause tax problems) and, of course, don't forget to (very clearly) define the Trigger Event....</p>

<p>If the company is owned 90% by one person, then that person has the power to prevent any change. </p>

<p>The only way you can do this is to have a cast iron contract between the two owners specifying that A will sell 40% of the LLC ownership to B for a fixed price X whenever B requests this. </p>
