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Suppose a soon to be shareholder (New Shareholder) subscribes to become a shareholder of an LLC (Company A) on 1 November 2000 through a subscription letter.

New Shareholder transfer cash to the company on 2 November 2000.

Company A legally transfers shares (SH01 and Share Certificate) on 3 November 2000.

On what date does the New Shareholder have shareholder rights in the company?

1 November 2000? 2 November 2000? 3 November 2000?

  • What is your jurisdiction? Also, is the LLC an S-Corp then? As far as I'm aware, only LLCs structured as S-Corps could have shares, otherwise there are only members. Also, what does the subscription letter state about new shareholders? Without that my first instinct is that they become a shareholder on acceptance of the offer, which could be either Nov. 1 or Nov. 2 depending on the wording of the subscription letter. – Andrew Jun 24 '20 at 15:21
  • LLCs don't have shareholders (even if taxed under Subchapter S of the Internal Revenue Code). They have members. Corporations have shareholders. The jurisdiction in question (particular state within the U.S.) and whether it is a corporation or an LLC, which is ambiguous in this question, both impact the fine details in a case like this one. Voting to close for lack of critical details. – ohwilleke Nov 13 '20 at 23:17
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On 1 November the prospective shareholder and the company entered a contract.

On 2 November the prospective shareholder fulfilled their obligation under the contract by payment of money.

On 3 November the company fulfilled its obligation and the prospective shareholder became an actual shareholder.

  • Is a "subscription letter" a term of art in this area of law? Otherwise, why would the subscription letter be an offer and not an "ad" / request for offers? If it is a request for offers, the acceptance is by the LLC deciding to accept the offer from New Shareholder. – Andrew Jun 24 '20 at 15:23

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