Hey everyone, I run a small design studio and I'm the only member of my LLC right now. My accountant mentioned that adding a second member could open up some tax perks, but I'm worried about the extra paperwork and losing the simplicity of a single-member LLC. Is there a real advantage to having more than one member, or is it just more hassle than it's worth? I'd love to hear from people who've actually done it.
LLC
Is there a real advantage to having more than one LLC member?
More members means more voices. And by voices, I mean arguments about profit splits. Unless you really need the capital or skills, I'd stay solo tbh.
Tax perks? Like what? S-corp election can happen with one member too. Maybe your accountant meant something else. I'd ask for specifics before you add a warm body.
I added my spouse as a second member for our LLC last year. Mainly for asset protection and to simplify inheritance stuff. The paperwork wasn't bad, but we had to update our operating agreement. It's beeen fine so far, but we're also married, so trust isn't an issue.
Wait, you can add a spouse? I thought that was a bad idea for liability. But I guess if you're already sharing finances...
Spouse as member can be tricky if you divorce. Just saying.
Yeah, we have a buy-sell agreement in place. Not romantic, but practical.
The main advantage I've seen is that multi-member LLCs can elect S-corp status and and split reasonable salaries and distributions more flexibly. But you can do that with one member too. The real benefit is if you bring in someone with complementary skills or capital. Otherwise, it's just extra complexity for no gain tbh.
Agree with taxes_r_us. Unless you need the money or the expertise, don't do it. I've seen too many partnership go sour.
Thanks for the input. I think I need to press my accountant for more details. The S-corp thing might be what he was hinting at, but he wasn't clear. And yeah, the spouse angle is interesting but not applicable here.
Let us know what you find out. I'm curious too.
Also, check if your state has any annual fees per member. Some do, and that can add up.