This post on how to prove ownership of an LLC was inspired by a great question we received from a client based in Virginia. The client’s concern was that the State of Virginia doesn’t include information about LLC owners (called members) on formation paperwork, so the client’s Articles of Organization can’t be used to prove ownership of the LLC when needed (for getting a bank account, company credit cards, and so on). So, what other options exist for proving you own your LLC?
It turns out there are several ways to prove ownership of an LLC beyond a company’s Articles of Organization. These include your LLC operating agreement, initial resolutions, and EIN confirmation letter. We’ll explain how all of these documents can prove ownership of your LLC.
Ways to Prove LLC Ownership
There are times when you’ll need to prove that you actually own your LLC, such as when taking out a business loan, signing a lease, or courting a new investor. In these cases, you can use one of these documents to prove ownership:
1. LLC Operating Agreement
Your LLC operating agreement serves as a contract between the members of your LLC, documenting your internal policies, management structure, and membership interest, among other things. The name and ownership percentage of each LLC member should be included in your operating agreement, and the document should be signed by all members. Since an operating agreement is legally binding, it can be used to prove ownership of your LLC.
An operating agreement is an internal document, so you don’t need to submit it to a government agency. You simply keep it on file with your business records. Forgot to include membership information in your operating agreement? No problem. You can update your operating agreement at any time, as long as you have the consent of all LLC members.
2. Initial Resolutions
Your Initial Resolutions are a legal document stating who has control over your LLC, which can be used to prove LLC ownership. This document needs to be signed by the organizer of your LLC (the person who signed the Articles of Organization). Like your operating agreement, the Initial Resolutions are an internal document that should be kept with your records.
3. EIN Confirmation Letter
Your EIN confirmation letter can also prove ownership of your LLC. This is the letter you receive from the IRS after you successfully apply for an EIN. Your EIN (Federal Employer Identification Number) is a tax ID number assigned to your business by the IRS. Your EIN confirmation letter will include your LLC’s EIN, business name, and responsible party.
What’s a responsible party, you ask? Your EIN responsible party is the person you name on your EIN application who has financial control over your LLC. You may only name one person as your responsible party. If you have a multi-member LLC, this will likely be the member with the greatest membership interest and/or authority within your LLC. Only your responsible party will be able to use this particular document to prove they own the LLC.
4. LLC Articles of Organization (In some states!)
Certain states require members to list their names and addresses on the LLC Articles of Organization, whereas others do not. States like Wyoming, Delaware, and New Mexico don’t list owners’ information on any public filings, making them ideal for living privately with an LLC. In states where listing members’ names is not required, you usually have the option to attach membership information if you want to. (However, be aware that everything included on the Articles of Organization will go onto the public record.)
In Virginia, where our client’s business is based, members’ names are not listed on the VA Articles of Organization, so our client couldn’t use this document to prove ownership of the LLC. However if you, for example, started an LLC in Montana, where you are required to include members’ names and addresses on the Articles of Organization, you could use this document to prove who owns your LLC.