A second member changes far more than a percentage. It introduces shared economics, authority, voting, tax reporting, transfer restrictions, information rights, dispute risk, and an eventual exit problem that should be documented early.
Federal defaults differ
The IRS generally treats a domestic single-member LLC as disregarded for income tax unless it elects corporate treatment. A domestic LLC with at least two members is generally classified as a partnership unless it elects corporate treatment.
Governance becomes essential
Define voting thresholds, manager authority, reserved decisions, deadlock handling, access to information, and who can bind the company.
Economics need precision
Record contributions, percentage interests, allocations, distributions, reimbursements, guarantees, and what happens if someone contributes more later.
Design the exit before conflict
Address voluntary transfers, death, disability, divorce, termination, bad acts, valuation, payment terms, and who may buy an interest.
References for this guide
Internal Revenue ServiceLLC filing as a corporation or partnershipUse these official sources to verify the current requirements after you finish the guide. They open in a new tab.