Sample LLC Membership Certificate: Everything You Need to Know
What is a sample LLC membership certificate and do you need one? 3 min read
2. What Does a Membership Certificate Include?
3. The Letter of the Law
Sample LLC Membership Certificate
What is a sample LLC membership certificate and do you need one? We all hear of stock certificates that are issued to individuals who own stock in a publically held company, also known as a C Corporation. But, as a member of an LLC, you have a financial stake in this business entity. As a member of an LLC, you own shares of it. As such, you should be given a membership certificate.
What Does a Membership Certificate Include?
The idea of creating and distributing membership certificates can seem like a daunting task, perhaps creating fear that you will somehow break the law. The good news is that they exist online or at office supply stores, and there is any number of templates which you can fill out yourself. Additionally, the LLC generally distributes the membership certificates to its members directly, so it can all be done “in-house.”
- Issue date
- Certificate number (this will often already be printed on pre-designed certificates)
- Name of member
- Name of LLC
- State in which the LLC was formed
- Date on which the LLC was formed
- Investment made by member
- Percentage of LLC owned by member
There are additional things that some LLC membership certificates may include, such as verbiage regarding the members’ interests or a statement of benefits. Signatures will also be found on an LLC membership certificate but may vary as to who exactly signs it.
The Letter of the Law
LLC membership certificates are not required by law to be distributed to members, either by the Internal Revenue Service or by any state’s Secretary of State. Themembership certificates do not carry any legal standing; that is only done by the operating agreement established at the formation of the LLC and a signed contract between the LLC andits members.
While you may not be legally obligated to provide proof of LLC membership certificates, you will need to provide a copy of your LLC’s operating agreement with both the IRS and the Secretary of State of where your LLC is located. Much of the information that usually appears on an LLC membership certificate is exactly what needs to be spelled out in your operating agreement.
This provides additional assurance that the members have easy access to the specifics of their membership while ensuring that the LLC itself continues to adhere to the policies spelled out in their operating agreement.
As a member of an LLC, it offers that proof, almost like a store receipt, of your ownership in the business, thus protecting you from any potential fraudulent behavior on the part of the managing member, or whoever owns the majority shares of the LLC.
While it’s legally required that the 100 percent shares of an LLC be distributed among all of the members, it is not a requirement that they be distributed evenly. As such, a managing member or members can be someone who owns the majority of the shares.
If you are a multi-member LLC that is looking for additional investors, you may be subjected to additional regulations regarding the membership level of an investor. As such, the issuance of LLC membership certificates, which spell out these restrictions, can be helpful for an LLC in ensuring that all enforceable issues are being honored. These same restrictions and policies will need to also be clarified in the operating agreement.
Additionally, it is important for an LLC to keep a ledger or online journal, tracking the membership certificates. While not required, it is best practice to ensure the membership certificates are being properly documented, as doing so will make things much smoother should a member decide to sell their shares. This help protect you against potential fraud should another member claim to have lost their certificate.
You will have a recorded ledger entry of the certificate number, issuance date, investment, name, etc., of the original membership certificate before issuing the member a new one.
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