What Are LLC Membership Certificates?

by Tiffany C. Wright, studioD Google

Limited liability companies are popular among entrepreneurs who want to structure their businesses as legally separate entities to help shield personal assets and establish business credit. LLCs are also popular as holding vehicles for real estate investments. Despite this popularity, many people are not familiar with the LLC structure and related laws. New business owners sometimes mistake the requirements for corporations with those for LLCs, and membership interests sometimes are confused with corporate stock.

Shareholders Versus Members

A corporation's owners are called stockholders or shareholders. An LLC's owners are called members. Corporations are governed by federal laws that provide clear definitions of the roles within corporations including shareholders, officers and directors. LLCs are governed by the laws of the state in which they are created. These laws are typically highly flexible, allowing much of the definition of the roles within LLCs to be controlled by each company's particular operating agreement.

Stock Versus Membership Interests

Corporations, upon formation, must designate the number of outstanding shares and the par value of stock and then issue stock certificates. An LLC's operating agreement defines the base value of its membership interests. LLC members’ ownership derives from the agreement between the company and its members, not from the possession of a certificate. Because the ownership interest in an LLC is contract-derived, an LLC has no legal requirement to issue certificates for membership interests.

Legal Value

Essentially, membership certificates have no legal value unless the LLC's operating agreement or other written documentation signed by all members defines them. Hence, for those with more familiarity with corporations and stock certificates, the term "membership certificates" can be misleading. Unlike stock certificates, the factors governing a membership certificate -- including but not limited to the value, issuing process and percentage interest -- must be spelled out clearly in the operating or similar agreement in order to avoid any confusion on the part of the members or membership certificate holders.


If you do use membership certificates to formally signify ownership, make sure you fully authorize them in your operating agreement or similar document. In addition, create an acceptable format or utilize a template, available online, that documents all the necessary information on the certificate. Whenever your LLC makes changes to the membership certificate, you must amend the operating agreement or create another written, fully executed document to record the changes. Conversely, make sure you fully reflect changes to executed documentation that affect membership interests on properly updated membership certificates.

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