Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 3 down vote favorite
2

Hopefully someone can gimme a hand. This is actually a question for a school project, but I've got some ideas kicking in my head for a startup, so I have good cause to know this for personal benefit too!

I'm creating a fictional LLC agreement for my business law course: my "investors" require a 51% share of the LLC. Part of the assignment requires that I "...come up a mechanism to maintain control even when my interest is less than 50%."

I've done some googling and turned up nothing. Maybe I'm looking at the wrong keywords.

Help is appreciated!

share|improve this question

4 Answers

up vote 2 down vote accepted

Google "passive investor". A passive investor is someone who invests money in a business (and expects a monetary return for his investment), but is not involved in the day to day management decisions of a business. Basically, they give you money in exchange for equity, without meddling in business decisions.

share|improve this answer
up vote 6 down vote

One of the great things about an LLC is that an Operating Agreement can allocate economic interests differently than it allocates voting rights.

Please see "Can an LLC have Members with a Non-ownership Economic Interest?", which describes a real-life client situation where we created an LLC with five classes of ownership interests.

Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

share|improve this answer
up vote 2 down vote

The Ford family owns about 2% of the total shares yet maintains control over the Ford motor company. Just a matter of having different share classes.

share|improve this answer
up vote 1 down vote

You probably want 2 different components. One is to create different classes of shares. Each class can have different rights and distribution priority. Second, and more importantly, make the LLC manager-managed. Give the manager broad control over the operation of the company. Make sure that the "investor class" of member shares can't pool up and vote out you as manager.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.