As a member of an LLC, it is important to have a buyout agreement in place in case one or more members decide to leave the company. A member buyout agreement outlines the terms and conditions of the member`s departure and ensures a smooth transition for the remaining members.
Here is a sample LLC member buyout agreement:
Introduction
The purpose of this buyout agreement is to establish the terms and conditions of a member`s departure from the LLC.
Definitions
– “LLC” refers to the [name of the company].
– “Member” refers to the departing member of the LLC.
– “Remaining Members” refers to the members who continue to be part of the LLC after the departure of the Member.
– “Buyout Price” refers to the amount to be paid to the Member for the purchase of their membership interest.
Buyout Price
The Buyout Price will be determined based on the following formula:
Buyout Price = [total value of the LLC] x [percentage of the Member`s ownership interest]
The total value of the LLC will be determined by a third-party appraisal conducted within 60 days of the Member`s departure. The percentage of the Member`s ownership interest will be based on the Member`s capital account balance at the time of departure.
Payment
The Buyout Price will be paid in cash or by promissory note within 90 days of the Member`s departure. The Remaining Members may choose to pay the Buyout Price in installments, provided that the final payment is made no later than two years from the date of departure.
Termination of Membership
Upon the departure of the Member, the Member`s membership interest in the LLC will be terminated. The Member will have no further rights or obligations as a member of the LLC.
Confidentiality
The terms and conditions of this buyout agreement are confidential and may not be disclosed to any third party without the written consent of the LLC and the Member.
Governing Law
This agreement shall be governed by the laws of the state in which the LLC is organized.
Conclusion
A member buyout agreement is a crucial document for LLCs to have, as it ensures a smooth transition in the event that a member decides to leave the company. This sample agreement can serve as a starting point for LLCs to establish their own buyout agreements tailored to their specific needs and circumstances. As always, it is recommended to consult with a legal professional for further assistance.