Assigning and Issuing LLC Interest In Illinois
The following are some things to consider when issuing and assigning LLC interest in Illinois:
· A membership interest, by definition – whether or not evidenced by units, is only a distributional interest and does not grant any individual (other than the original members) holding such interest member status unless specified in the operating agreement. See 805 ILCS 180/10-1.
· Because member status does not simply accrue through holding a membership interest, it is distinctively different from corporate stock. The business owner running a manager managed LLC (corporate structure) should bear in mind that having a corporate structure does not grant corporate characteristics to membership interests, whether or not those interests are evidenced by units. See 805 ILCS 180/10-1.
· It is extremely important to have an accurate capital account out of which liquidation distributions are paid for each membership interest issued and outstanding, as this is required for the IRS to respect the tax consequences of profit allocation. See U.S. Department of the Treasury Regulation 1.704.1(b)(2)(ii)(d).