What is an LLC Membership Certificate?

You should always highlight all parties who have an ownership stake in an LLC in the operating agreement. However, as an LLC owner with controlling interests, you can issue an LLC Membership Certificate   LLC Membership Certificate to each individual who owns a portion of the business.

What is a membership certificate for an LLC? 

If you’ve ever traded on the stock market, you’re probably familiar with stock certificates. These certificates outline ownership percentages, detailing the percentage of a company you acquired when you bought said stock. 

An LLC membership certificate essentially outlines the same but is reserved solely for members (LLC owner title) of a limited liability company. In the past few years, most corporations ceased to issue paper stock certificates, opting to keep digital spreadsheets instead.

In the case of a limited liability company, the certificate of membership isn’t mandatory.  Legally, the creation documents and operating agreement outline the legalities of business owners. However, creating these certificates is a good way for members to track their ownership share. 

What is included in an LLC membership certificate? 

Even though they’re not mandatory by law, an LLC member certificate must have specific items included. It’s also important these items are accurate. 

Only a few states legally require limited liability companies to create operating agreements to prove ownership. It’s possible that, in some cases, Certificates of Membership serve as the primary documentation of owned membership units or the ownership percentage for each member. Certificates of Membership serve as the primary documentation of owned membership units or ownership percentage for each member.That said, membership certificates must include the following: 

• The registered owner’s full name
• Their percentage owned by each member. This can be measured in membership units (ownership units) or as a percentage of the company ownership.
• The official name of the limited liability company.
• The official business address.

Again, issuing physical ownership certificates to all current or future investors is not mandatory. However, considering using them to back your official business records (assuming you have an operating agreement) is never a bad idea. 

It’s a given that certain types of LLCs stand to benefit more from these certificates than others, for example: 

• They’re not as useful for a single-member LLC but have potential value if you have multiple shareholders or investors. If one of your members submits a loan application at any point, these certificates serve as helpful secondary proof of their business affairs. 
• A series LLC would most likely benefit by issuing certificates. These types of LLCs generally have multiple business locations operating as separate entities under one umbrella.
• Multi-member LLCs are an obvious candidate for membership certificates, but is there any favor regarding member managed vs. manager-managed LLC companies? Membership interest certificates are ideal in the case of members-managed LLCs. The reason is that manager-managed tend to be smaller organizations, often with a silent partner or similar scenario. 

How to Fill Out an LLC Membership Certificate

It’s vital that you fill out the original certificate properly and have concise, accurate certificate wording. You can find a certificate template in dozens of places online, but that doesn’t mean it’s right for your business. 

Use the following list as a general certificate template with standard wording: 

1. The official name of your company, identical to your formation documents
2. Member name
3. State you chose to file formation documents
4. Each member’s percentage of ownership (expressed as an ownership percentage or in individual ownership units) (expressed as an ownership percentage or in individual ownership units)
5. The date of execution by signature
6. Authorized member signatures (usually the majority owner)
7. Signature of the person receiving the certificate of the percentage of ownership interest

On some certificates, there’s space for a witness signature. Many owners choose to have the certificate notarized. Selecting either of these actions gives the certificate more credibility — and a much better chance of holding up in court if a dispute arises. 

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Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.