Limited Liability Companies (LLCs) are an appealing type of corporation to many business owners and entrepreneurs because they provide a range of benefits like the opportunity to avoid double taxation.
A major difference between the LLCs and the other corporations is the fact that limited liability companies provide LLC certificate of memberships while the other corporations provide stocks to the people who invest in them.
There is a lot of confusion when it comes to learning about the important aspects of LLCs member certificate and different types of LLC certificate of membership. In this article, you will learn about these factors to ensure you have all of the essential skills and knowledge about the LLCs membership certificates.
What is an LLC Certificate of Membership?
In an LLC, membership certificates are issued to each member to show that they have stakes in the organization. It is important to have the LLC membership certificates as part of the important records included in the registers and corporate ledgers. Thorough and reliable records are useful in enhancing the reputation of the organization and getting through various legal procedures.
The LLC itself is responsible for providing the membership certificates and ensure accurate and reliable information is added to these certificates. In case of any changes in the LLC, the certificates also have to be edited or reissued.
Purpose of an LLC Certificate of Membership
LLC certificates of membership are helpful useful in facilitating the organizations to get through the essential processes like ownership, taxation, and profits. It is the responsibility of the LLC’s secretary to sign the certificate. The signature of the secretary is typically included, along with the signature of a secondary officer acting as a witness.
Best Practices of Issuing LLC Membership Certificates
The company secretary also has to focus on limiting the number of membership units and allocating the memberships on the basis of the employee’s interests in the LLC. Most of the organizations include LLC’s Operating Agreement to elaborate the significance of the certificates and their role in the LLC.
Moreover, the members should get the original LLC certificate of membership to show their ownership. At the same time, the LLC must keep copies of every membership certificate as part of its extensive records. Report any significant changes in the annual report filings. It is also important to ensure the LLC certificates of membership are updated from time to time to avoid any legal disputes.
How to write an LLC Certificate of Membership?
There is no definite pattern that you have to follow to write an LLC membership certificate. You can easily find online templates to write and issue LLC membership certificates. Once the certificate is issued and signed by the secretary of the LLC, you can issue it to the members. There is no need to notarize the certificates.
Important components of the LLC membership certificates are:
An LLC certificate of membership must include the name of the member to whom the ownership interest is being given. Similarly, it must include the name of the company and the state in which the LLC is operating. The rights of the members are also elaborated on the certificate under the operating agreement.
Legal rules and regulations do not make it obligatory for LLCs to issue certificates of memberships. As a result, the rules for signing the certificate are different in various companies. In some LLCs, only the authorized managers have to sign the membership certificate. Most of the companies implement an internal process of formally signing the LLC certificate of membership under the presence of the company secretary and a witness.
3 Types of LLC Certificates
When you are in the process of developing an LLC business, you will have to be familiar with the following three types of LLC certificates:
1. Certificate of Organization
Certificate of Organization consists of the name of the LLC, the date of its incorporation, business address, and the address of at least one member of the company. However, the rules regarding the Certificate of Organization greatly vary from state to state.
Some of the states do not require LLCs to obtain these certificates. Instead, the business owners might be required to file Articles of Organization, which are quite similar to the LLC Certificate of Organization.
LLCs must keep the Certificate of Organization with the original documents of the company’s creation and other essential business documents, financial reports, annual filings, and certificates of good standing.
2. LLC Certificate of Membership
LLC Certificate of Membership is issued to represent the stakes of the members in the company. The law does not make it compulsory for LLCs to issue certificates of memberships. However, it is recommended to develop and issue these certificates to maintain the organization’s records and avoid legal issues.
3. Certificate of Good Standing
An LLC becomes eligible to obtain the Certificate of Good Standing when it completes the annual report and pays all of the necessary changes to the state. It is important for business owners to get this certificate because various banks and investors view the LLC’s Certificate of Good Standing as proof that the company is complying with the state regulations. Otherwise, the company can face challenges in finding investors and lenders.
The bottom line is that the owners of the LLCs must be aware of the important documents and certificates that they have to obtain while running their business. LLC certificate of membership useful in ensuring the smooth functioning of the business and also winning the trust of the investors. Hence, you should follow the guidelines discussed above to prepare the LLC membership certificates and enjoy their benefits.
You can always contact us if you have any inquiries or want more information.