LLC Certificates: What You Need to Know
A variety of LLC certificates are given to individual members or to the LLC itself.3 min read
A variety of LLC certificates are given to individual members or to the LLC itself.
What Are LLC Certificates?
LLC certificates may be issued to certify good standing, establish an LLC, or verify member ownership. LLCs require a certificate of organization as part of the establishment process. Members (aka owners) hold certificates that function similar to stocks. The certificate of good standing verifies that the company is meeting its requirements for yearly state filings. Certificates are useful for establishing profit records, taxation documentation, and verification of owner interest. Keep them updated so you don't face problems with registration or other legal issues.
Certificate of Organization for a Limited Liability Company
LLCs are registered in the state where they primarily conduct business. Some states use articles of organization instead of a certificate of organization. These function in the same way. Keep the certification of organization with the other documents used to create the LLC.
These documents include information about owners and the percentages of ownership for each member. Keep yearly filings and certificates of good standing with these documents; this way, you have all relevant documents about ownership in the same place.
What Are Member Certificates?
Stock certificates are given to shareholders to show their ownership stake within a corporation. LLCs, instead, have membership certificates for each member. There are a few differences between these two documents.
LLCs are not legally obligated to give out membership certificates. Check with the state where the LLC was formed to determine relevant laws.
LLCs are primarily beholden to their operating agreements, and most state laws around LLCs are flexible. LLC owners contribute capital to the business and receive a percent of owner interest in the LLC. LLCs can issue membership certificates in order to document the number of units each member holds; membership interest is not determined by stock.
The operating agreement must contain the terms used to issue membership certificates. Terms to include are the process for issuing certificates and how much value they hold (by percentage). Be sure to include a section to your operating agreement that describes the role of membership certificates, should you decide to use them. Terms to include are the process for issuing certificates and how much value they hold (by percentage). Be sure to include a section to your operating agreement that describes the role of membership certificates, should you decide to use them.
Member certificates are issued by the LLC itself. It determines how many units to issue, the name of the person who will receive the certificate, and the state where the certificate is issued. The number of units should be determined by the LLC's founding owners. An unlimited number of membership units can be issued. It is common to issue units according to the percentage of membership interest. You can also issue units based on a fixed number of membership units.
The membership certificate should include:
- The date it is being issued
- A certificate number
- The member's name
- Company information, such as the company's name and date of formation
- The state the LLC operates in
- The amount of capital the member invested in order to gain membership interest
- The membership interests the owner possesses, usually written as a number of units or percentage of ownership
- A written statement that details what the certificate means and what benefits or rights it gives the member
- The current number of members when the certificate is issued
- Potentially, a disclaimer stating that membership interests are non-transferrable
- Signatures by the member(s) who are in charge of issuing membership certificates
The secretary generally signs each certificate. A witness or second officer's signature is also appropriate. The LLC's operating agreement can list the members who are allowed to sign official documents on the LLC's behalf. You don't need to have the certificates notarized.
Give the original certificate to the member; it serves as proof of ownership. Make a copy of the certificate for your LLC's records; keep copies of all membership certificates together. Usually, member certificates are issued at the formation of the LLC. If significant changes to membership happen, you might destroy old certificates and create new ones for everyone.
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