Shareholders Versus Members of a Business

Business owners have the obvious interests in a business, but others do as well. The type of business entity determines the possible involvement. Some interests include the right to a portion of the profits and the right to make business decisions. There are members and there are shareholders.

Corporations have shareholders, partnerships have partners, and limited liability companies have members.

A shareholder owns an interest in a corporation but might not be part of the management or operations of the business. A corporation is lead by a board of directors, not its shareholders. Shareholders can vote in board of director elections and receive a portion of the profits based on the shares they own. Shareholders or stockholders are the owners of a corporation.

Members of a limited liability company (LLC), like shareholders, receive a portion of the company profits. Members, however, are also involved in the operation and management of the business. In fact, owners of an LLC are its members. Their ownership interest is based on the money or property they have invested in the business. Both individuals and business entities can be members of an LLC. Manager-managed LLC’s are managed by members appointed to the operation and management of the company.

There are of course other kinds of memberships and members as well. For instance, a membership at a museum gains you entrance but doesn’t give you partial ownership or management rights.

Different business entities are appropriate for different businesses. Consult with your business advisor and attorney to determine which will work best for you.

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