Bringing a new member into your Limited Liability Company (LLC) is a formal legal and financial process that changes the ownership structure of your business. It impacts every existing owner's stake and requires careful documentation to be valid. Dappr provides a guided workflow for issuing membership interest, which ensures the process is documented correctly and your company remains compliant.
This guide explains what it means to issue membership interest, how it differs from a simple transfer, and the step-by-step process for adding new members in Dappr.
Note: This is an advanced feature that should be performed by the company's legal representative or another user with sufficient permissions.
Understanding membership issuance vs. transfer
It is critical to understand the two ways the ownership of an LLC can change, as they have different legal and financial implications.
Membership Issuance (This Article): This is when the company itself sells a new ownership stake to a new or existing member. The new member pays a capital contribution directly to the company. This action increases the total ownership pool and therefore dilutes (reduces the percentage of) the ownership stakes of the existing members. This is the LLC equivalent of a corporation issuing new shares to raise capital. The cash from the capital contribution increases the company's assets on its Balance Sheet.
Membership Transfer: This is a private sale where one member sells their existing ownership stake to another person or member. The payment goes from the buyer to the selling member, not to the company. This does not dilute the other owners; it simply changes who holds a particular piece of the ownership pie. This process is covered in a separate article.
Dappr's "Issue membership interest" feature is designed specifically for the first scenario: bringing in new capital and diluting existing ownership to add new members.
How to issue membership interest
Dappr's guided workflow ensures that the proper legal steps, such as obtaining member approval through a formal resolution, are followed.
From the main menu, navigate to Business Records.
Select Ownership from the top menu, then click the Membership issuances tab.
Click the + Issue membership interest button in the top-right corner.
Step 1: Authorize the issuance
The first and most important step is to confirm that the issuance has been properly approved by the existing members, as required by your LLC's Operating Agreement. A resolution—a formal written record of a major decision made by the owners—is required to legally authorize this action.
If a resolution has already been approved: Select "Yes, a resolution is approved" and choose the specific, approved resolution from the dropdown list.
Important: It is your responsibility to ensure that the approval method complies with your Operating Agreement beforestarting this process. For example, if your agreement requires unanimous consent for adding new members, you must ensure the selected resolution was approved by all members. Dappr cannot verify this for you.
If you need to get approval: Select "No, issue a written consent." Dappr will automatically draft a formal written consent document that includes a resolution authorizing the issuance. This document will then be sent to all existing members for their signature, creating a legally binding record of their approval.
Step 2: Define the issuance details
Click the Add new member button.
Select the person or business who will be receiving the ownership stake.
Enter the Ownership they will receive (either as a percentage or a number of units, depending on your LLC's structure) and the required Capital contribution they will pay to the company.
Click Save. You can repeat this process to add multiple new members in a single issuance.
As you add new members, you can view the "Updated cap table" on the right side of the screen. The capitalization table, or "cap table," is a detailed record of your company's ownership structure. This live preview is a crucial tool that shows you the exact outcome of the dilution on all members' stakes before you finalize the issuance, helping to prevent errors.
Select the Issuing date. This is the official date the new member's ownership becomes legally effective.
Step 3: Finalize the issuance
Add any internal notes for your records.
Click the Proceed with issuance button in the top-right corner.
A final pop-up will confirm the next steps. The button will say either "Issue written consent" or "Confirm issuance," depending on the approval method you selected.
What happens next?
After you confirm, you will be taken to the issuance's dedicated page. The subsequent steps depend on the approval path you chose.
If Dappr generated a written consent
All existing members will be notified and will receive a task in their Dappr dashboard to review and sign the written consent. This creates a legally binding record of their approval, which is crucial for preventing future disputes. The issuance will not proceed until all required members have signed. If any member rejects the consent, the issuance's status will change to "Rejected".
Once the issuance is approved and scheduled
On the selected issuing date (or immediately if the date is today or in the past), Dappr will automatically update your company's official records:
New transfer ledger entries will be created. The transfer ledger is your LLC's official, chronological log of all ownership changes. These new entries will document the issuance of the new membership interest from the company to the new members. To view the transfer ledger, navigate to Business Records > Ownership > Transfer ledger.
For LLCs that operate on percentage ownership, Dappr will also create ledger entries to reflect the dilution of the existing members. This two-step process—transferring a portion from existing members to the LLC, then from the LLC to the new member—is the formal accounting method for ensuring the transfer ledger is perfectly accurate and that the company's total ownership remains at 100%.
This automated process ensures your ownership records are always accurate, compliant, and provide a clear, auditable history of your company's capitalization.