Do LLC membership interests need to be registered as securities?
If any of your members will not be active in the LLC or if you choose manager-management for your LLC, you may need to comply with federal and state securities procedures when setting up your LLC. (If you’ll be the sole owner of your LLC and you don’t plan to take investments from outsiders, your ownership interest in the LLC will not be considered a “security” and you don’t have to concern yourself with these laws.) Membership interests in a manager-managed LLC might be classified as securities because nonmanaging members may be investing their money in a business in which they are not actively participating. A security is defined as an investment in a profit-making enterprise by an investor who is not running the company. If a person invests in a business with the expectation of making money from the efforts of others, that person’s investment is generally considered a “security” under federal and state law.
If any of your members will not be active in the LLC or if you choose manager-management for your LLC, you may need to comply with federal and state securities procedures when setting up your LLC. (If you’ll be the sole owner of your LLC and you don’t plan to take investments from outsiders, your ownership interest in the LLC will not be considered a “security” and you don’t have to concern yourself with these laws.) Membership interests in a manager-managed LLC might be classified as securities because nonmanaging members may be investing their money in a business in which they are not actively participating. A security is defined as an investment in a profit-making enterprise by an investor who is not running the company. If a person invests in a business with the expectation of making money from the efforts of others, that person’s investment is generally considered a “security” under federal and state law. Conversely, when a person will rely on his or her own efforts to make a prof
