In an LLC, transferability of a member's interest is restricted similarly to a partnership, requiring the consent of other members. This contrasts with the ease of share transferability in corporations, which promotes investment while protecting shareholder liability.
- In a Limited Liability Company (LLC), the transferability of a member's interest is restricted in the fashion of a partner.
- This means that, unlike in corporations where shares can be freely transferred, LLC members usually face some restrictions on their ability to transfer their ownership interest.
- These restrictions are typically outlined in the LLC's operating agreement and can require the consent of other members before a transfer can be made.
- LLCs provide a structure where shareholder liability is limited to the amount they have invested in the corporation.
- This encourages investment as shareholders can partake in the company's profits while knowing their personal assets are protected.
- Nonetheless, unlike a corporation that allows for easy transfer of ownership through the sale of stock, LLCs have restrictions that resemble those in a partnership, where each partner must agree to the addition or substitution of a new partner.
- This can affect the fluidity with which ownership interests are distributed among members or new investors.