If you are one of the many entrepreneurs in North Carolina who is evaluating your options for a new company, you know that one of the decisions you will need to make is what type of operating structure you will settle on. A corporation can be an S corporation or a C corporation but, in both cases, shares of stock are issued to shareholders. In a Limited Liability Company, or an LLC, members are owners based on their financial investment, not based on the number of shares they have purchased.
The Houston Chronicle explains that another key difference between LLC members and corporate shareholders is that the former are actively involved in the day-to-day operation and management of the company. The one exception to this is if the LLC elects to have a manager-management structure where a member is granted a special status allowing them to operate the business. LLC members must make decisions by majority vote which can mean members often must cede their preferences for a final decision.
Corporate shareholders do not generally get involved in the details of running the company. They do, however, vote in the elections held to establish the company’s board of directors. They also have the right to initiate legal action if they believe the company is not being properly managed.
If you would like to learn more about some of the nuances of the differences in the rights for corporate shareholders and for LLC members, please feel free to visit the company ownership rights and responsibilities page of our North Carolina business law website.