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LLC Buyout Agreement Template
What Is an LLC Buyout Agreement?
An LLC Buyout Agreement is a legal document that records the decision of a Limited Liability Company (LLC) member to leave the company and outlines the steps that will be taken once that departure takes place. You should prepare this document to avoid people you do not know receiving ownership stake, secure interests in case of a member's or partner's disability or death, and establish a fair price for this member's share of business for other members who choose to remain.
Alternate Name:
- LLC Partner Buyout Agreement.
Various events and personal situations can trigger the buyout - long-term illness or disability, divorce, bankruptcy, retirement, transfer of ownership, or death. You need to be prepared when one of the LLC members chooses to leave the organization, retires, or dies. If you do not have this contract in place, depending on the laws and regulations of your state, you may be forced to pay off the debts of the company and dissolve the LLC with all assets divided among the members.
A printable LLC Buyout Agreement template can be downloaded below. You may print it out and complete it along with other official documentation of your LLC:
- LLC Articles of Organization indicate the main information about the organization for the public records and begin the official business activity of any company.
- An LLC Operating Agreement belongs to the internal documentation of the company and establishes various rules and procedures that specify the day-to-day course of business.
How to Write an LLC Buyout Agreement?
It is highly recommended to discuss, negotiate, and prepare an LLC Buyout Agreement before an unexpected situation. You can draft this document when you start your company or create it later at any convenient time - for instance, if a member or partner is planning to leave the company, you can call a member meeting to determine what to include in the agreement.
Here is how you compose an LLC Partner Buyout Agreement:
- Confirm the member's decision to leave the company.
- Indicate the reason for the member's departure and the date when that happened or will happen if you control the circumstances of the departure.
- Outline the rights of the departing member and remaining members. You need to figure out the value of the membership stake and the terms of the upcoming purchase. All members have to agree with the membership valuation and decide whether the departing member's ownership percentage will be purchased with installments or a lump-sum payment.
- Name individuals who will be allowed to purchase the interest of the departing member. In accordance with the internal documentation of your company, you can allow outsiders to buy this interest or limit this option to other members of the LLC. Members of the LLC can prevent any member from transferring their interest to certain individuals or entities with whom they would not want to do business.
- Sign the agreement. You must obtain signatures of all members, remaining and departing, to show the acknowledgment of the situation.
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