Alabama Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance

State:
Multi-State
Control #:
US-03467BG
Format:
Word; 
Rich Text
Instant download

Description

In the absence of a valid restriction, a member in an LLC may transfer his/her interest in the LLC (usually expressed in membership units) to anyone. Restrictions on the transfer of membership units are valid if they are not unreasonable. This form provides that the LLC has the right to purchase a members membership units upon his death. The LLC can fund this transaction through a life insurance policy on the members life with the proceeds going to the LLC. The proceeds will then be used to buy the deceased members membership units.


A restriction on the right to transfer membership units is not effective against a purchaser of the unit unless the purchaser knows of the restriction. Such a restriction can be conspicuously noted on the membership certificates.


This form is set up as a Buy Sell Agreement between the LLC and a key member. It applies in the case of the death, disability, retirement or offer of member to sell his membership units during his lifetime.


This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.

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  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance
  • Preview Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance

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FAQ

Life insurance creates a lump sum of cash to fund the buy-sell agreement at death. Life insurance proceeds are usually paid quickly after your death, ensuring that the buy-sell transaction can be settled quickly. Life insurance proceeds are usually income tax free.

This is usually referred to as the funding strategy. Buy-sell agreements can be funded through proceeds from life insurance, critical illness, or disability insurance policies. The beneficiary of the policy may be the corporation or the business partners.

Buy-sell agreements are normally funded by life insurance and disability insurance. Using life insurance to Fund a Buy-Sell Agreement is a business use of life insurance.

One common question we receive when discussing key person benefits is ?What is a buy/sell agreement?? A buy/sell agreement, also known as a buyout agreement, is a contract funded by a life insurance policy that can help minimize the turmoil caused by the sudden departure, disability or death of a business owner or ...

The life insurance premiums used to fund a buy-sell agreement are not tax deductible. In a Cross-Purchase Agreement where an individual shareholder purchases life insurance on the life of another shareholder and pays the premium, it is paid for with after-tax dollars.

Life insurance proceeds provide liquidity for ordinary living expenses and estate tax liability. Buy-sell agreements can be structured under various forms, including 1) entity redemption, 2) cross purchase, 3) cross endorsement, 4) wait-and-see and 5) a one-way agreement.

A membership interest purchase agreement, sometimes called a MIPA, is a contract between a seller and a buyer to transfer the ownership of an LLC. A MIPA transfers the whole company with all of its assets and liabilities being transferred by the contract.

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Alabama Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance