What Is an LLC Membership Certificate?

An owner of a limited liability company (LLC) is called a member, and the ownership shares of each member should be specified in an LLC’s operating agreement. But if for some reason your LLC failed to draw up an operating agreement, or created an inadequate one, there is another place to turn to confirm an LLC ownership share. 

Membership certificates also specify LLC ownership stakes, and this convenient guide lays out all you need to know about LLC membership certificates and how to get your hands on them. 

What Is an LLC Membership Certificate?

An LLC membership certificate looks similar to stock certificates issued by corporations, but membership certificates are neither legally required nor official documents. No state or local government requires membership certificates, but they can come in handy should the need arise. 

Each membership certificate specifies an LLC member’s name and their share of ownership in the LLC, as a percentage or a number of units. It will also contain the LLC’s name and state of formation. 

How does one acquire these certificates? Only LLCs are capable of issuing membership certificates, and it’s a good idea to have your LLC issue one to each of your LLC members around the time of formation. 

Member certificates are non-transferrable, unless allowances and related procedures have been specified in the operating agreement. The transfer of an ownership stake contained in a membership certificate is not a good idea, and not recommended. 

Ownership changes should instead be made by amending the operating agreement, after which the LLC can issue new membership certificates as needed. 

Benefits of LLC Membership Certificates

LLC membership certificates generally do not serve any official purpose, but they do have a few benefits.

1. Members have a tangible document confirming their ownership. If disputes arise over the ownership specified in the operating agreement, the membership certificate may provide a “backup” document for a member to argue their interests in court.
2. Membership certificates are a secondary record for the LLC of member interests. The operating agreement is the primary record. But keep in mind that not all states require operating agreements, so in some cases membership certificates could serve as the primary record.  
3. Members can present them to lenders or investors as proof of ownership, although since they are not official documents, a copy of the operating agreement may still be required. 

How to Fill out an LLC Membership Certificate

You can find a host of membership certificate templates online or create your own. The certificate must include:

• LLC name
• Member’s name
• State of LLC formation
• Member’s ownership stake, expressed as a percentage or number of units
• Date of issuance
• Signature of the issuing member, signing on behalf of the LLC
• Signature of the member highlighted in certificate 

Having your signed certificate notarized will make it more likely to stand up in court as proof of ownership. Finally, a copy of issued certificates should be kept in the LLC’s records.

In Closing

Membership certificates, while not official documents, offer several benefits to members and the LLC. However, we strongly recommend against issuing membership certificates in lieu of drafting an operating agreement, which usually contains countless critical provisions on management issues, legal entanglements and more. 

Issuing membership certificates to all your LLC members is a good idea, but so is hiring an attorney to draft an operating agreement that protects all members and the interests of your business.