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BizIPEsq.
BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience:  I am a business attorney. I represent individuals and companies with all business related matters.
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Is there a way to write a contract between two individuals

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Is there a way to write a contract between two individuals granting equal rights to an LLC that's currently under the name of one of the individuals? For the time being it doesn't make sense to go through the effort of formally including both parties in the legal filed documents, but we'd like to secure that agreement on paper until such time when it becomes 'official'. Can the expert point to some example agreements?
Submitted: 1 year ago.
Category: Business Law
Expert:  BizIPEsq. replied 1 year ago.

TheLegalistEsq :

I will be assisting you. Let me review the question. I will need to log off so please bear with me

TheLegalistEsq :

"rights in a LLC" are called a membership interest. Membership interest has value and is a property interest. Therefore one cannot simply grant something of value to the other without it becoming a taxable event. The correct way to look at this is that the 100% member will sell 50% of their membership interest to the other person. The two of you would need to enter into a membership interest purchase agreement and also amend the operating agreement of the company to reflect that a new member has been added. I caution you though in that once you sell a membership interest unless there are specific provisions that would allow the seller to buy back the membership interest the sale is final. So notwithstanding, not filing an amended information sheet with California and not making it "official" (legally would not be the correct statement I am just using it to illustrate the issue), the sale would be permanent.

TheLegalistEsq :

If the two if you are just trying to test things out, then you should enter into an agreement that will give the other person the option of buying a membership interest in the future upon a certain event (for example if you successfully work together for 3 months etc.)

TheLegalistEsq :

Here is a sample membership interest purchase agreement

TheLegalistEsq :

Try this link instead

TheLegalistEsq :

Thank you for using Just Answer

Customer:

Well, I clicked through to that link and let's just say that's too much legalese for what we were (hoping) to do. Would a simpler agreement stating that 'Party x agrees to have option to sell to party y 50% stake on the LLC' suffice? no 'ifs' and 'but's? We basically want to enter into this fully as 50-50 without at this time having to go through the paperwork. If the agreement at this time would fall under an option to buy, then as long as it can't be backed out, that would be fine?

TheLegalistEsq :

I hear you. Essentially the two of you can agree to enter into any type of buy sell agreement you want to. There is no mandate to use a long form. All a long form does is to address many different scenarios that could occur. If you and your partner want to keep it short and sweet and the two of you are confident that you'll be able to work through issues if questions arise then what you suggested would work.

TheLegalistEsq :

excellent follow up. Good luck!

BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience: I am a business attorney. I represent individuals and companies with all business related matters.
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