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kattorney
kattorney, Attorney
Category: Business Law
Satisfied Customers: 1142
Experience:  16 years experience with a concentration in business, corporate and contracts law
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I need documents that will handle the sale of a persons interest

Customer Question

I need documents that will handle the sale of a person's interest in an LLC to one of the other LLC owners. This is a 3 person LLC, one person is leaving, and I would like to purchase their share of the company for a nominal fee, e.g. $1 or $100 or whatever. The other person will agree to this, but I need to documents drafted to complete this transfer. There is currently no operating agreement in place. So likely I'll need a Purchase Agreement, Bill of Sale, and a new Operating Agreement with the remaining 2 owners in it.
Submitted: 1 year ago.
Category: Business Law
Expert:  kattorney replied 1 year ago.

Kathie Russell :

You need a unit purchase agreement. We are not permitted to give legal advice on this site, so I am not able to draft an operating agreement for you, but if you like I could provide a form which you can use for your unit purchase agreement. You do not need a bill of sale. Once you have your new member, you can then get an operating agreement in place.


 

Customer:

Hi Kathie

Customer:

Yes, if you would provide the form that would be great.

Customer:

I just want there to be a clean break and the person not able to be successful at claiming she owns a right to anything after selling her interest in the company.

Kathie Russell :

Yes, this document will accomplish that. Just give me a moment and I'll be right back.


 

Customer:

Ok.

Kathie Russell :

After you look over the form, let me know if you have any questions.

Customer:

Ok. I'm reading it now. I'll let you know shortly.

Kathie Russell :

OK.

Customer:

in 7 - Settlmenet and RElease - what is the last blank?

Customer:

the "of either ___" is confusing -- shouldn't this be " of ____"

Customer:

or should it be "of either <company name> or <other owners' names>" ?

Kathie Russell :

Actually, I believe it should be just "of either." No blank should be there.....does that make more sense?


 

Kathie Russell :

It could be purchaser or seller, but I think I would just leave it at "either."

Customer:

Yes it does. One more question - should i have language in there protecting the other remaining owner against the Seller's claims. E.g. the seller is selling to me, the purchaser, but there is still 1 other party who owns part of the llc - should there be a provision in 7 releasing any claims from him as well?

Kathie Russell :

No, since other member is not a party to the unit purchase agreement. Any matters between you and other member should be handled in the operating agreement. You can't bind a non-selling member to this agreement and your purchase has no bearing upon his membership and vice versa. Normally, I would tell you to get a copy of the remaining member's agreement to allow a new member, since most operating agreements require it, but since you stated they do not have an operating agreement you should have no issue with the other member.


 

Kathie Russell :

Oh wait, sorry.


 

Kathie Russell :

I see that you are already a member, I forgot that part.


 

Kathie Russell :

As long as there is no operating agreement you are fine and don't need anything from the third member.


 

Customer:

Ok - yes there is no operating agreement. I will implement one after this sale between myself and the remaining owner.

Kathie Russell :

Again, if you had an operating agreement already, it would likely specify the procedure for one member selling units - i.e. the company itself has first right of refusal, then each member has a chance, etc. But since you do not have that, then the seller is free to sell to you and you are free to purchase.


 

Kathie Russell :

Agreed, you definitely need to get one in place.


 

Customer:

this document looks good. Would it be appropriate to add something like " Seller is the owner of 100 units (the "Units") of a total of 300 units in <company name>..."

Kathie Russell :

Yes, I always like to add that. I think it's a good idea.


 

Customer:

considering we haven't laid out how many units there really are, it would probably be a good idea to say "you own 1/3, you're selling all your 1/3 interest"


or some language like that.

Customer:

and i think just doing 100 out of the total of 300 would do that - there's no dispute the ownership is owned 1/3 1/3 and 1/3

Kathie Russell :

Yes, if there is not a specified number of units then I would base it on 100% and use percentages.


 

Customer:

she's selling her 1/3 to me, such that I will own 2/3 and my other partner will own 1/3 still

Customer:

ah ok .. yeah, better idea.

Kathie Russell :

You could just specify out of 100% you own 33.3% or whatever...


 

Kathie Russell :

I'm doing a quick check of the TX LLC statute to make sure there's nothing in there....it is a TX LLC, correct?


 

Customer:

right .. perhaps in words "seller is the record owner of one third (the Units) of <biz name>..." Then we can still call the 1/3 ownership the Units throughout the doc.

Customer:

yeah, TX LLC

Kathie Russell :

Yes, that would be good. I'm pretty sure there won' t be anything in the statute to address this but I'm just double checking.

Kathie Russell :

No, there is nothing in the statutes. There are provisions governing the admittance of new members who purchase units or are assigned units, but nothing about a current member acquiring more units. So you are fine with this agreement, no problem.


 

Customer:

Excellent. Yeah, I think all I have to do in reporting to TX Sec of State is amend the member-manager list on the next year's update filings. Great. Thank you for the document. I'll customize and fill it out. As for the op. agrmnt. Can I contact you later regarding that?

Kathie Russell :

Correct as to updating the filings, you are welcome, and yes you can contact me about the operating agreement - I may be able to find a form you can use (I don't want to give you mine because not sure it's appropriate for TX law but I can see if I can find one that is).


 

Customer:

Sounds good, Kathie. thanks so much. How do I get back in touch with you ?

Kathie Russell :

You are very welcome. You can just begin a question with "for kathie russell only" and it will get to me.


 

Customer:

Sounds great, Kathie - thanks so much!

kattorney, Attorney
Category: Business Law
Satisfied Customers: 1142
Experience: 16 years experience with a concentration in business, corporate and contracts law
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