Membership Interests in an LLC – Perfecting a Security Interest

The Uniform Commercial Code provides for several methods by which a secured   party can perfect a security interest in the membership interest of a limited liability company, particularly when such membership interest is uncertificated. 

Although other methods of perfection exist, the best way to perfect a pledge of a membership interest in an LLC is to file a UCC financing statement.  The financing statement should list the owner of the membership interest as the debtor and the description of collateral should describe the membership interest pledged. 

This method of perfection is different than the method of perfection used to perfect a pledge of stock in a corporation, and lenders should be cautious to use the correct method of perfection depending on whether the pledged collateral is an ownership interest in an LLC or an ownership interest in a corporation.

Author: Laura A. Scott (bio)
Phone: 812.452.3557
email: [email protected]

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