Unlike a corporation that designates ownership through stock shares, in an LLC, ownership is distributed through membership interests. An LLC membership certificate documents each of the member’s ownership interests by units or percentages.
While you aren’t required to issue LLC membership certificates, it may be beneficial if you plan to sell membership interests to incentivize future investors.
Read on to learn more about issuing LLC membership certificates for your business.
What Does an LLC Membership Certificate Include?
An LLC membership certificate documents the amount of ownership each member claims. Membership can be assigned by ownership percentages or by creating a set number of ownership units that are distributed among members. There are a few things that must be included in this document, such as:
- The number of units or percentage of ownership issued
- The name of the LLC
- The state the LLC operates in
- The name of the member receiving the certificate
Distribute the original copy of their membership certificate to corresponding members as proof of their claim to the organization. Additionally, the LLC needs to keep a copy of each certificate issued as part of its records.
LLCs should ensure they have an updated copy of their Certificate of Good Standing acknowledging their company has been legally formed and maintained. Both LLC membership certificates and Certificates of Good Standing help LLCs structure and manage membership interest, profits, and taxation.
When Do You Need to Issue LLC Membership Certificates?
LLCs aren’t required to issue membership certificates, and for certain businesses, they aren’t necessary or advantageous. For example, LLCs with a small number of owners that aren’t planning to take on outside investors aren’t likely to find a need for membership certificates.
However, there are circumstances when issuing certificates can be beneficial, such as if the organization plans to raise outside capital and will use membership interests to incentivize potential investors. This typically pertains to LLCs with a large number of owners or those that seek outside funding.
To be safe, include clear provisions of membership interests in membership certificates. This makes necessary restrictions on the type of membership investors can have easily enforceable.
How to Start an LLC
If you haven’t formed your LLC yet, we can help you get started. LLCs are the easiest formal business structure to start and maintain, plus your business gains the tax benefits and personal liability protection unique to LLCs. Starting an LLC can be done in six easy steps:
- Establish the state where you’ll be conducting business
- Name your LLC and register the name you’ve chosen
- Choose a registered agent
- File formation documents
- Create an operating agreement
- Get an Employer Identification Number (EIN)
Keep in mind that you must include any LLC membership certificate information — including the process of issuing the certificate, the value of each membership interest, and the percentage of each membership certificate — in your operating agreement.
LLC Membership Certificate FAQ
How do I fill out my LLC membership certificate?
There are two ways to create an LLC membership certificate: Acquire one from a registered agent’s website, or purchase blank certificates from office supply stores.
If you’re starting from scratch, be sure to include the date, the state of operation, the name of the LLC, the name of the member receiving the certificate, and the number of units or percentage of ownership being issued.
What is a membership interest certificate?
A membership interest certificate also referred to as an LLC membership certificate, is a document that designates a specific unit of interest or ownership a member has in an LLC. Membership certificates aren’t required for all LLCs, but they can be beneficial for LLCs with outside investors or several owners.
How do you issue membership interest in an LLC?
Issuing membership interest in an LLC starts with your operating agreement. All membership interests need to be detailed in this document along with whether they are issued in units or percentages. Additionally, you need to include the type of consideration that is being exchanged for membership interests. This is typically cash but can also be services or personal assets as well.
The party responsible for issuing membership interests should be documented under LLC member resolutions in your operating agreement. However, we also recommend using the services of an attorney to issue membership interests for your LLC to ensure the process is executed correctly.