LLC Certificate: Everything You Need to Know
An LLC certificate of organization (or formation) is required when forming this type of entity. 3 min read
An LLC certificate of organization (or formation) is required when forming this type of entity. Once you file this certificate, you will then need to designate member certificates and seek a certificate of good standing. Each of these steps will be critical to the long-term success of your LLC. Here is what you need to know when forming an LLC.
What Is a Limited Liability Company?
When forming a limited liability company (LLC), you will require a certificate of formation — which is sometimes called a certificate of organization. As an owner, you will be referred to as a member. Whether you are a single-member LLC or multimember LLC, member(s) receive certificates that are similar to stock ownership.
Overall, there are three types of LLC certificates:
- Certificate or organization
- Member certificates
- Certificates of good standing
Certificate of Organization
To register an LLC, you must do so through the secretary of state. For example, a Delaware LLC Certification or Formation is similar to a birth certificate. It represents your newly formed LLC, which will operate out of and pay taxes to Delaware. During this process, the following information will be required:
- An LLC name — which must end in LLC
- The effective date
- The name and address of the LLC's registered agent
- The address of the LLC's registered office
- Whether the LLC will be run by managers or members
- You may need to provide the name and address of each organizer
- If your state does not offer a separate professional LLC category, you may be asked to state your business as a professional LLC
When you receive your approved certificate of formation in the mail, it will be stamped and dated. Depending on your state, you will file either a certificate of organization or articles of organization. These two documents are essentially the same and serve the same purpose. In most states, you will be provided with a PDF form to create the LLC certificate of organization, making it easy to apply.
However, if you have more than one member or the LLC is complex in its structure and terms, you will need to seek legal counsel.
Certificates are what determine each member's stake in the organization. This is similar to stock shares in a corporation. It is the LLC itself that designates the number of certificates that are issued and to who. Although most certificates are issued at the time of formation, changes in ownership can result in new certificates being issued and old certificates being revoked.
These certificates are what help owners identify the LLC's structure in terms of profits, ownership interest, and taxation. If there are any key changes made throughout the year, these changes will be included when filing an annual report. It is important to maintain and update all certificates in order to prevent any issues with the ownership and registration of your LLC.
On a certificate of membership, you will often find:
- The name of the LLC
- The state the LLC was formed in
- The number of members
- The entitled benefits of the owner
- The date of issuance
- A signature of an authorized member, such as the secretary of state
You will also notice a bill of sale portion. This is included if you (the owner) would like to sell your share of the company. Within this portion, you will find a space to indicate the date of sale, the sale amount, the new owner, and the signatures that represent the sale transaction.
Certificate of Good Standing
Once your LLC's annual report is filed and all fees are paid, you will receive a certificate of good standing from the state. This means your LLC will be authorized to conduct business. This certificate is often required by lenders, vendors, investors, and banks, indicating your LLC complies with state regulations. Not having this certificate is a red flag for those who may want to conduct business with you.
All your certificates, including annual filings and certificates of good standing, should be kept together in one centralized location. That way, if you need to reference any aspect of ownership, you can do so quickly and efficiently.
If you need help obtaining any LLC certificate, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.