Enjoy the benefits of Assignment of membership interest in Llc form
A Limited liability company or LLC as it is popularly known, enjoys the benefits of both corporation and partnership. One of the advantages enjoyed by its members is that it provides an option of assignment of membership interests in Llc form without actually transferring entire ownership.
Why assignment is needed
Rights of a member of an LLC can be basically categorized into two, ownership rights and financial rights. Assignment of Membership Interest in Llc Form, in most cases, transfers financial rights to the assignee, while ownership rights remain with member or assignor. A member of an LLC may decide to assign his membership interests in following situations:
- Provide collateral to a lender on loan taken by a member. Here, the lender can partake in the profits, while member retains his ownership rights.
- Repay an existing debt taken by a member or company. Here also, ownership remains with the member.
- A member may voluntarily decide to give up his interest in the company in favor of another member or an outsider. In this case, with the consent of other members, both ownership rights and financial rights are transferred to the assignee.
Impact on business
Since the assignment is done only for financial interest in most cases, the assignee does not acquire any right to participate in the management of the company. He is merely an onlooker when it comes to management. But in some cases, with approval from other members, he may be allowed a role in the functioning of the company.
Having said this, the actual rules of assignment of membership interest in Llc form may vary from case to case, based on members’ agreement or on state laws.