If you`re starting a limited liability company (LLC) with another person or group of people, it`s important to have a buy-sell agreement in place. This document outlines what happens in the event that one of the members wants to leave the company or becomes incapacitated.

A buy-sell agreement restricts the transfer of ownership in the company. It can also establish a price for the sale of a member`s share of the business. This can be beneficial in preventing disputes and ensuring a smooth transition in the event of a member`s departure.

There are several different types of buy-sell agreements, including cross-purchase agreements and entity-purchase agreements. In a cross-purchase agreement, the remaining members of the LLC purchase the departing member`s share of the business. In an entity-purchase agreement, the LLC itself buys the departing member`s share.

It`s important to carefully consider the terms of a buy-sell agreement. This includes determining the valuation method for the company and establishing a funding mechanism for the buyout. Funding mechanisms can include life insurance policies, installment purchases, or a sinking fund.

In addition to outlining the terms of a member`s departure, a buy-sell agreement can also establish how the company will be managed in the event of a member`s disability or death. This can include naming a successor to the departing member`s role or establishing a plan for the distribution of profits.

Overall, a buy-sell agreement is an important document for any LLC with multiple members. By establishing clear terms for the transfer of ownership and management of the company, it can help prevent disputes and ensure a smooth transition in the event of a member`s departure.

Publicado: 17 agosto, 2022