Frequently Asked Questions

What are the implications of selling ownership percentages in an LLC to raise capital?

Selling ownership percentages in an LLC to raise capital can have significant implications for the business. An LLC, or Limited Liability Company, is a type of business structure that combines features of a corporation and a partnership. The ownership of the company is defined by the members' percentages. When an LLC decides to sell ownership percentages to raise funds, it essentially means that the members are selling part of the company to someone who is likely an outsider. This decision can have serious implications for the business. Even if the new member is buying a very small percentage of the company, he or she still gets an equal say in the way the company is run. This can potentially lead to disagreements or conflicts in decision-making, which can affect the smooth operation of the business. Moreover, the process of selling ownership percentages involves updating the operating agreement to reflect the changes. This can be a complex process that requires legal expertise. Therefore, it is advisable for business owners to consult a professional, such as an accountant or lawyer, before making such a decision.