LLC Certificate of Membership Interest: Everything You Need to Know
An LLC certificate of membership interest is similar to a corporate stock certificate in that it indicates the member's ownership percentage in a limited liability company (LLC).3 min read
What Are LLC Membership Certificates?
An LLC certificate of membership interest is similar to a corporate stock certificate in that it indicates the member's ownership percentage in a limited liability company (LLC). An LLC is a flexible business entity that is administered by the state. The company owners (members) file a certificate of organization to form the LLC. Once established, the LLC can obtain a certificate of good standing from the state to prove that all annual filing and tax requirements have been met.
Certificate of Organization
The certificate of organization is filed with the secretary of state where the LLC is formed. It includes:
- The company's official legal name
- Date of establishment
- Business address
- The name and address of at least one member.
Some members require the certificate of organization to include information for all members, including the membership percentage allocated to each. In some states, the certificate of organization is called the articles of organization. File the certificate of organization with your LLC's other official documents.
Membership certificates are distributed to each LLC member and indicate his or her ownership stake in the organization, the number of units, the state in which the LLC is based, and the member's name. A membership certificate may also contain:
- A unique certificate number.
- The date of issue.
- The legal name of the company and the date of its formation.
- How much the member initially invested in the LLC.
- The total number of LLC members at the date of issue.
- A statement of benefits and rights conveyed by the membership certificate.
- A disclaimer indicating whether the certificate is transferable.
Although membership certificates are typically issued when the LLC is established, new certificates can be issued and certificates invalidated with changes in membership. You can find online templates to help you create this document. It should be signed by the LLC's secretary along with a witness.
A copy of all membership certificates should be retained in the LLC register, and each member keeps his or her original. Most states do not require these documents to be notarized. If changes are made, you should note them when you file the annual report with the secretary of state.
You can easily create and print certificates using desktop publishing software and blank certificate paper. In some states, you may be required to keep a certificate ledger; however, it makes sense to do so even when it is not a legal requirement.
A member should protect the membership certificate as he or she would a securities certificate or stock. If the certificate is lost, the member must sign a statement verifying it has not been sold or transferred before the LLC reissues a new certificate. He or she should also assign an indemnity agreement releasing the LLC from liability related to the new certificate. The managers should approve the reissue by resolution or at an official meeting.
Assignment Form on Certificate
Membership interests can be assigned when allowed by both your LLC operating agreement and the state laws. If your membership interests can be assigned to another person or business, print a blank assignment form on the other side of the membership interest certificate. Like an automobile title transfer form, the owner can use this to assign his or her ownership interest to another business or entity in accordance with the LLC operating agreement.
Certificate of Good Standing
The certificate of good standing serves as proof that the LLC has fulfilled state requirements, such as:
- Annual reporting
- Franchise taxes.
It shows that the LLC is currently cleared to conduct state business. You may be asked to present your certificate of good standing to investors, lenders, vendors, and banks. Not having this certificate may dissuade them from working with you.
When establishing an LLC, make sure to choose a name that distinguishes your business from others in the state. It must end with the words "Limited Liability Company" or "LLC." An attorney can help you determine whether your desired name fits state requirements. Your LLC should also have a registered business address in your state.
If you need help with creating a certificate of membership interest for your LLC, 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.