The following are (somewhat edited) an Avvo question and my answer: Q. Is it necessary to file a Form D securities exemption when forming a California limited liability company (LLC) and only issuing an interest to the forming members?
A. The short answer is “no“. The somewhat longer answer is as follows:
Quoting from Selecting and Forming Business Entities by Continuing Education of the Bar: “A member-managed LLC…may be analogized to a general partnership, and the LLC interests are not securities. In a manager-managed LLC..the LLC interests are securities.”
Even if the LLC interests are securities, they probably will be exempt from the federal registration requirement because the interests were not issued in a public offering. The issuance probably will qualify for a CA securities exemption under Corporations Code Section 25102(f), but you must file a Limited Offering Exemption Notice with the California Department of Corporations within 15 days.
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
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