{"id":467,"date":"2015-05-18T17:18:48","date_gmt":"2015-05-18T21:18:48","guid":{"rendered":"http:\/\/www.michaelsmithlaw.com\/blog\/?p=467"},"modified":"2025-03-09T22:13:46","modified_gmt":"2025-03-10T02:13:46","slug":"when-is-the-interest-in-a-limited-liability-company-a-security","status":"publish","type":"post","link":"https:\/\/www.hpindiana.law\/business-blog\/when-is-the-interest-in-a-limited-liability-company-a-security\/","title":{"rendered":"When is the interest in a limited liability company a “security”?"},"content":{"rendered":"

The issuance or sale of securities is subject to regulation by the United States Securities Exchange Commission and by authorities in every state, including the Securities Division<\/a> of the Office of the Indiana Secretary of State. \u00a0 Depending on the situation, a member’s interest in a limited liability company may or may not be within the definition of a “security” and, therefore, may or may not be subject to federal and state securities laws. \u00a0If the securities laws apply, the consequences can be signficant because, as my friend and retired securities lawyer Steven Lund says, “There are three types of securities: \u00a0registered, exempt, and illegal.”<\/p>\n

Contrary to what you may sometimes hear, there is no exemption for securities that are issued or sold to family members or close friends, and there is no sale of securities that is exempt solely because the value is less than a certain amount. \u00a0In addition,\u00a0certain parts of the securities laws, such as those prohibiting securities fraud, apply to every securities transaction, even if it is exempt from registration requirements. \u00a0An illegal sale of securities can have serious ramifications, including civil lawsuits and potentially even criminal charges. \u00a0And there can be ramifications even if there is never a lawsuit or governmental enforcement action\u00a0 For example, a debt incurred through a securities violation cannot be discharged in bankruptcy. \u00a0Owners of small businesses who set up new LLCs, or bring new members into existing LLCs, without obtaining the advice of a lawyer with experience in corporate and LLC law<\/a>\u00a0expose their businesses and themselves to signficant risk.<\/p>\n

Continue reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The issuance or sale of securities is subject to regulation by the United States Securities Exchange Commission and by authorities in every state, including the Securities Division of the Office of the Indiana Secretary of State. \u00a0 Depending on the situation, a member’s interest in a limited liability company may or may not be within […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,18],"tags":[],"class_list":["post-467","post","type-post","status-publish","format-standard","hentry","category-limited-liability-companies","category-small-businesses"],"yoast_head":"\nWhen is the interest in a limited liability company a "security"? — Indiana Business Law Blog — May 18, 2015<\/title>\n<meta name=\"description\" content=\"The issuance or sale of securities is subject to regulation by the United States Securities Exchange Commission and by authorities in every state, — May 18, 2015\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.hpindiana.law\/business-blog\/when-is-the-interest-in-a-limited-liability-company-a-security\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Michael R. 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