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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
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There is a buyout clause in our partnership agreement. I would

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There is a buyout clause in our partnership agreement. I would like to sell my share and move on. Since this is a new business no one is willing to buy us out and work with stranger. I am thinking of letting the business run for 6 months (my partners want 100% of profit) and then try to find a buyer - should be easier if we have a track record of 6 months.

How does a buy out work? Do we need to update our current partnership agreement or add a new addendum that includes the new buyer?
Submitted: 1 year ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your new question and for asking for me.

If there is a buyout clause then the buyout works as the clause in your contract describes. Once you exercise that clause, then it is up to the partnership to get the new buyer to sign onto the new partnership agreement and the annual reports if any would be amended and the articles of organization would be amended to reflect the new buyer's ownership.




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Customer: replied 1 year ago.

In our current agreement, one of the clause says" A member may transfer membership interest to any other person without the consent of any other member."


 


So does this mean that the new buyer has to inform the remaining members and come up with a new partnership agreement?


Do they have to keep the same LLC or would they form a new LLC?

Expert:  Law Educator, Esq. replied 1 year ago.
It means they keep the same LLC, the buyer becomes a member and has to sign the membership agreement which you need to provide him to review as part of the sale process. The clause also means that the other members cannot stop you from selling.

Once the sale is complete it is up to you to send copies of the sale documents to the LLC to put them on notice you have sold your interests and then the new buyer would have to deal with the LLC.
Customer: replied 1 year ago.

If we have addendum to the current operating agreement is the new buyer bound by the addendum as well?


To resolve the current stalemate, I am thinking of foregoing the profit for 6 months or so. This is unfair to me, as I won't receive anything for my investment. But one good thing is that I can find a buyer if I show 6 months performance


Expert:  Law Educator, Esq. replied 1 year ago.
Yes, the buyer is going to be bound by the entire operating agreement and will have to sign onto it or negotiate a new one.
Customer: replied 1 year ago.

Is it up to the buyer to negotiate a new agreement or do I need to get involved?


 


Can we have an addendum to the operating agreement that goes into job description and profit split etc? I don't want to update the current operating agreement which has clauses regarding the percentage owned etc.

Expert:  Law Educator, Esq. replied 1 year ago.
It is up to the buyer to negotiate anything new they want in the agreement, not you.

You can have an addendum that does describe job descriptions of members and profit splits, that is entirely up to the members of the LLC if they want to agree to such an addendum.
Customer: replied 1 year ago.

My question is if the new buyer is bound by the addendum.


What's the usual procedure for addendum? Is it normal for operating agreements to have addendum?

Expert:  Law Educator, Esq. replied 1 year ago.
Yes, once the buyer commits to buy and signs the contract as part of everything he signs he would have to sign onto the bylaws, agreements and addendums. Yes it is normal for agreements to have addendums, it is just a separate agreement that modifies the original.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 92774
Experience: All corporate law, including non-profits and charitable fraternal organizations.
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