LLC share certificates document each members ownership in a company. By having printable templates it makes the process easier to customize to edit details
SmallBizTrends reports that over 35 percent of businesses use LLCs (limited liability companies). The top businesses were in the accounting, legal services, and real estate industries.
77% of entrepreneurs funded their businesses with personal funds.
Almost half of these businesses tracked between 2014-2018 failed.
The LLC structure provides partial protections to its owners or members. Each member should have documentation of their responsibilities and interests within the business.
An important part of providing this protection is LLC share certificates. This will help each member take advantage of the protection.
It is important to issue certificates to the members of your LLC to protect each member. Though share certificates are usually associated with corporations.
Below we'll present a case in favor of physical share certificates and provide recommendations to incorporate their efficient production into your business.
Understanding the Need for Share Certificates
Part of forming an LLC is drafting the operating agreement. The operating agreement lists the responsibilities and interests held by each member. The operating agreement is the LLC's governing document.
An LLC business structure allows for a disproportionate allocation of business interests or units, usually dependent on capital contribution, but could also be a service contribution or other assets.
The flexibility of the LLC business structure includes foregoing the bylaws, shareholder meetings, incorporation of director/officer structure, and many other formalities that usually define a corporation.
The advantage of this is that the LLC members themselves can define the structure of their business.
After the completion of an LLC's operating agreement, each member should be issued an LLC member share certificate defining that member's specific interests within the business.
The member share certificate would also be used should the member want to transfer their interests or units as defined in the operations agreement. The conditions under which such transfers can occur should also be defined in the operations agreement.
The member share certificates serve not only as proof of the division of interests but also serve as protection of the LLC's members.
LLC Share Certificates: Protecting Your LLC Member Interests
A member share certificate is physical proof of each member's interests or units. This is the reason most corporations issue stock certificates. Should an internal dispute arise there is proof.
The LLC member share certificate in combination with an updated ledger and LLC's operating agreement serve as representations of each member's responsibilities.
A dispute can be resolved using the documents drafted at the time of the formation of the LLC.
Another instance when a certificate can help is when a member decides to sell or transfer their part. The certificate can then function much like a car title when a car is sold and there is a transfer of ownership. The document can then be used to register the transfer at the appropriate agency.
In this case, it would need updating the ledger and business records.
Many businesses have switched to electronic share certificates. While this seems like a smart move in the internet age, there are drawbacks to only having a computer copy.
Printed LLC Share Certificates in the Internet Age
Electronic share certificates are still stored somewhere. A physical location within a server which is a device much like a USB, but capable of storing large amounts of data.
These servers act as filing cabinets for information.
Servers can go down which limits access when you need it. A server can also become damaged which means your certificates are gone.
The advantage of having printed LLC share certificates are the same advantages of having a paper version of a will or estate assets.
Should the electronic version become inaccessible or destroyed, there is access to the physical original which serves as a backup.
You can frame and hang a physical copy of your certificate. Then you'll have both decoration and easy access. Printed certificates are easy to edit and customized depending on the need.
Setting up a system for the printing of the certificates can be efficient and painless.
Here are a few steps to produce your own printable share certificates.
Creating Member Share Certificates
The best way to get share certificates is to have an LLC share certificate template.
Templates are easy to use since they allow you to fill out the blank information when you need it. You don't have to go through the hassle of designing a new one each time.
The LLC share certificate template should include:
- The issue date
- The certificate number
- The name of the member
- The name of the business, including the date of formation of the business and state of formation
- The specific contribution made by the member in exchange for units or interests
- The member's membership interests represented in with a percentage or number of units
- The total number of members as of the date of issuance
- The statements of benefits and/or rights the certificate represents
- Disclaimer that the interests may not be transferable
- The signatures of members authorized to sign LLC member share certificates
The certificate template is now ready to use. Another option is to buy premade templates. Templates are not expensive and take the guesswork out of creating your own.
Simplifying Your Certificate Process
A large part of U.S. businesses are LLCs with many share members. You should provide each member of your LLC protection in the form of documentation.
LLC share certificates are easy to produce and can save business time and resources.
We invite you to our blog to learn more about how to make your certificate process easy.