Legal Question in Business Law in California

Once I have an LLC company formed, and for example there are 3 owners. Owner 1 and founder have 50% ownership. Owners 2 and 3 have 25% ownership each trough distributed shares.

The reason asking is, I am staring an LLC company and I have a small group of others coming in to help build this company and they are being giving units or shares of the company for helping create it. This is an internet web company, and if all goes well in the future if we decide to go corporate I would like to go public with the company, for example selling on the NASDAQ.

How many shares does the company start with or get, and how are the shares divided up for sale, ownership etc.


Asked on 6/23/11, 7:10 pm

3 Answers from Attorneys
Mayer Nazarian Nazarian Law and Tax Group

First off, if your goal is to eventually go public, an LLC may not be the optimal choice. A consultation with a business or tax attorney will help you determine what your best choice of entity should be.

However, if you do decide to use an LLC, you can start with as many shares as you would like; it is subjective. The division of the units is based upon the term of the operating agreement.

Good Luck!

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Answered on 6/24/11, 12:37 am
Shawn Jackson The Jackson Law Firm, P.C.

Well, you may have a few conceptual issues to resolve first. With LLCs, you have membership interests, not shares. YOu only hve shares/stocks with a corporation. If you start as an LLC then convert to a corporation, you will have tax issues and management concerns. Secondly, you do not want to issue all the interests or shares the first time out, you will want to hold a reserve account. I would strongly suggest that you select a corporate attorney as soon as possible who will also help you with the business model, business plan and with the corporate/LLC structure along with the exit plan.

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Shawn Jackson ESQ. (707) 584-4529

Business Development Attorney

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Answered on 6/24/11, 6:25 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Even before hiring an attorney, I'd recommend you read a couple basic books on how small businesses are formed and organized. Either that, or add someone to your team who has been to business school.

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Answered on 6/24/11, 10:26 pm


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