In this November/December 2018 issue of Community Banker we discuss using limited liability companies and partnership interests as collateral.
It is not unusual now for a debtor to use his or its ownership interest in a limited liability company (LLC) or a partnership as collateral. Be aware that these interests may be classified as a general intangible under Article 9 of the Uniform Commercial Code (UCC) or as a security under Article 8 of the UCC. In North Dakota, the interests are typically and usually general intangibles, but lenders should know the difference. The difference of type is important because it determines how the security interest is perfected — whether a financing statement should be filed for the general intangible, or whether the secured party should file and take control of the securities.
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