Expert: Tad Borek Date: 5/5/2008 Subject: LLC Stock Certificates
Question Hello,
I had a quick question, if you know the answer or could tell me how to find it I would appreciate it. At my work we are trying to issue stock (actually unit) certificates for the members shares. We have the certificates but there was something about a seal, is the seal with the company information necessary?
I can't seem to find a good answer on the web so if you know or could guide me I would appreciate it.
Sincerely,
Holly
Answer Holly,
I don't think seals are required with LLCs, but you need to confirm that by researching the local law where you're setting up the company. It could be as simple as calling whatever state office you dealt with when filing your articles for the LLC.
If you're wondering what a seal is...a seal is an embossed stamp unique to the company; it's usually round and has the company name, state and date of formation. Most of those "company in a box" kits include a tool for stamping one, along with the certificates, binder, etc. It's a metal stamp that looks kind of like a hole-punch. Whoever keeps records for the company would apply the seal to certain "important" documents - things like formation documents, those ownership-indicia certificates, etc.
But it's a pain in the neck, and a little archaic, to use a seal - and part of the motivation for organizing as an LLC is doing away with some of the formalities of a traditional corporation. So you might do away with seal requirements entirely. Of course if you're using a template for an operating agreement that talks about member ownership being documented using Certificated Shares and Seals -- that would be a problem! And again, for all I know your local law might say something about it -- there are 50 states and each has its own LLC statute.
Have you gotten legal advice about setting up this LLC? If not, it might be a good idea to pay a local lawyer for a couple hours of time to make sure you have all your ducks in a row. At a minimum you should run through one of the "self-help" legal guides like those from Nolo Press (www.nolo.com). I believe they even offer a software package that spits out the right documents based on each state's local law. These kinds of questions are going to keep coming up and you want to make sure you're meeting the documentation requirements for your LLC, to make sure it's recognized as a valid entity. The certificate/seal question is really just the tip of the iceberg...this is a critical point where you need to make sure the operating agreement is drafted right to address all the ownership, control and tax questions that are going to come up.
