50 % intrest , 50% member
You did not indicate whether the LLC would be a partnership or a corporation, what the nature of the business was, or whether this is some form of security offering. This might be helpful in providing you advice.
I am HUGE opponent of "50/50" business relationship, because I have been forced to litgate them for years when they go bad. The result is like a divorce, it leaves a bad taste in everyone's mouth.
First of all, there is no such thing as "50/50." Someone is going to have more influence over the business than the other party. Second, there is no realistic way to resolve any profound disagreement between the parties unless you have a dispute resolution provision in your agreement. Third, if you do have a profound dispute, your investment capital is still tied up in the LLC with possibly no way to get it out.
All this being said, if you really want to be investor in this LLC find yourself a really good attorney to negotiate on your behalf that will protect your investment, and allow you to quickly recover it plus your profit if a dispute does occur.
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Due to the inherently flexible nature of limited liability companies in Texas, your question is very difficult to answer without a great deal more information and a review of the LLC's company books. This is certainly a situation where you want to be fully aware of your rights and obligations, so please consult with a business attorney prior to entering into this business relationship.
There are, however, several things to know about LLCs in Texas that could affect one member's relationship to another. First, you did not mention whether the LLC is member-managed or manager-managed. In the event that this is a manager-managed LLC, operation and control of the LLC is typically vested in the managers and not the members of the LLC. Obviously, if an owner was just a member of the LLC rather than a manager, he or she would have very limited involvement in the operation and control of the LLC's business decisions. Sometimes there are certain decisions made by the managers that require approval of the members (e.g. major business transactions and termination of the LLC), but these rights are spelled out in the LLC's company agreement (previously called "regulations" and sometimes improperly referred to as an "operating agreement" or "bylaws").
Second, Texas LLCs can have different classes of membership and these classes can have different rights under the terms of the company agreement. For example, while two members may have equal equity interests (50/50), one interest may hold voting rights while the other is non-voting. Clearly, this would remove the control of one of the members.
Third, the distribution rights in an LLC can be modified through the company agreement as well, which can result in one 50% member having a right to receive more than 50% of the distributions.
The list of rights that can be modified are certainly too lengthy to address in a short post such as this, but I hope that after reviewing the points above, you are able to see that 50% in an LLC might not be as straightforward as it initially sounds. I highly recommend that you sit down with an attorney and have him/her review the documents and advise you of exactly what you are getting into by purchasing that interest.
Best of luck!
The content provided in this post is for informational purposes only and is shall not be construed as legal advice. Additionally, nothing in this post may be construed to create an attorney-client relationship between Mr. Walters and any other person or entity.
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You need to look to the terms of the company agreement ("operating agreement"). It would certainly help to discuss with an attorney as well. Good luck!
This attorney can be contacted via email at email@example.com or via phone at 817.305.7170. The above answer does not constitute, and should not be construed as, legal advice.
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