Purpose of a Membership Certificate
An LLC membership certificate is a document that acknowledges LLC ownership by a member. It includes the member’s name, date of issuance, membership units, and rights and obligations. The certificate serves as evidence of ownership and establishes the member’s rights to participate in management, vote, and receive distributions.
Difference Between Membership Certificate and Stock Certificate
An LLC membership certificate acknowledges LLC ownership. It includes the member’s name, date, units, rights and obligations. The certificate serves as evidence of ownership and establishes rights to participate, vote, and receive distributions.
LLCs can issue membership certificates to members, like stock certificates to shareholders. Some LLCs don’t use certificates since the agreement controls. A certificate lists the member’s name, ownership percentage or units, LLC’s name and state. Members can’t transfer certificates unless allowed in the operating agreement, which isn’t recommended. State members’ rights are in the operating agreement.
While not required, certificates can benefit LLCs with multiple owners by structuring ownership interests, profits, and taxes. Members get the original certificate and the LLC keeps a copy. Maintaining an updated Certificate of Good Standing shows the LLC was properly created and maintained.