By Rikard Lundberg (August 22, 2017, 12:18 PM EDT) -- A limited liability company (LLC) is a popular legal vehicle for setting up a new business or joint venture because, among other things, it affords flexibility to design the capital and governance structure. A common question in this context is whether an LLC interest constitutes a "security" for purposes of determining whether state and federal securities laws apply. If an LLC interest is a "security," an LLC and holders of LLC interests must analyze and comply with state and federal securities laws in connection with the issuance and transfer of LLC interests. For example, most securities transactions must be registered or satisfy a registration exemption. Also, anti-fraud rules apply to securities transactions, and state and federal securities regulators have jurisdiction over securities transactions. The failure to comply may have significant consequences and may trigger, among other consequences, rescission rights, damages, and civil and criminal penalties....
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