Get Leaplaw Membership Interest Purchase Agreement

A transfer of an LLC interest where compensation is being paid is treated as a sale or exchange. The selling member will usually have a taxable gain or loss on the sale.

A MIPA sells the membership interest of the LLC. This is different from an Asset Purchase Agreement (APA) where only specific assets and not liabilities of the company are sold. When the membership interest of an LLC is purchased, both assets and liabilities are transferred from seller to buyer.

Like shares of stock of a corporation, a membership interest is a capital asset and, generally speaking, gain upon the sale of a membership interest will be taxable at capital gains tax rates if the interest was held for a period of more than one year prior to sale.

After the terms of sale are negotiated, a written membership interest sales agreement can be created to record the transaction. This agreement should detail the new member's ownership percentage, the amount of the buy-in, and require that the new member agree to be bound by the existing Operating Agreement of the LLC.

Stock purchase agreements (SPAs) are legally binding contracts between shareholders and companies. Also known as share purchase agreements, these contracts establish all of the terms and conditions related to the sale of a company's stocks.

All LLC members will be named parties under a buy/sell agreement, which is a legal document. The member who wants out of the LLC sells his or her ownership interests to the remaining members who then split that portion amongst themselves.

Summary. When a taxpayer sells an LLC interest, the taxpayer will usually have a capital gain or loss on the sale of the interest. However, capital gain or loss treatment does not apply to the sale of every LLC interest.