united-states limited-liability-company
Is there such a thing as employee owned LLC?
<p>There's employee owned companies, but I'm not looking to start anything quite so big. Is there a form of company like an LLC that's straight forward to file that will allow it to be employee owned?</p>

<p>Most limited liability companies (LLCs) are small, closely held firms that are owned entirely or in substantial part by active employee-manager-owners with modest capital contributions.</p>
<p>LLCs with large numbers of owners typically have a large share of non-employee investor ownership and are most common in oil and gas firms and in real estate firms that either develop, or buy and hold, real estate.</p>
<p>Most large accounting and law firms and many other professional service firms are organized as LLCs or LLP (limited liability partnerships), which are owned by the senior employees whose contributions as employees dwarfs their contributions as investors. (Non-lawyers and non-physicians aren't allowed to have ownership interests in law firms and medical practices, respectively). These are the largest firms in the world with significant employee ownership. Start up tech firms organized as LLCs also often give equity stakes to employees even below the senior-managerial employee level.</p>
<p>Rank and file employees are sometimes given an ownership interests in firms, but this is more commonly done through an employee stock ownership plan (ESOP) or certain other tax encouraged mechanisms for employee ownership in corporations (e.g., incentive stock options), or in the context of a firm organized as a cooperative (which is taxed essentially like a C-corporation but with an entity level deduction for cooperative dividends paid to members), than it is as an LLCs.</p>
<p>One important reason for this is that pass-through taxation (which applies to LLCs not electing to be taxed as corporations) is not workable as a means of imparting ownership to large numbers of rank and file workers, because the compliance paperwork of sending out dozens or hundreds of K-1s to these workers is daunting, and because the prospect of a disconnect between allocated income and loss, and actual distributions (e.g. taxation on &quot;phantom income&quot; of the entity that is not distributed) is problematic.</p>

<p>To quote the IRS page at:</p>
<p><a href="https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc" rel="nofollow noreferrer">IRS LLC</a></p>
<blockquote>
<p>Owners of an LLC are called members. Most states do not restrict
ownership, so members may include individuals, corporations, other
LLCs and foreign entities. There is no maximum number of members. Most
states also permit “single-member” LLCs, those having only one owner.</p>
</blockquote>
<p>Your particular state may have some additional restrictions.  In general, however, members of an LLC work for the LLC although that is not a requirement.</p>
