A limited liability company (LLC) is a separate legal entity that can conduct business just like a corporation with many of the advantages of a partnership. It is taxed as a partnership. Its owners are called members and receive income from the LLC just as a partner would. Management of an LLC is vested in its members. An operating agreement is executed by the members and operates much the same way a partnership agreement operates. Profits and losses are shared according to the terms of the operating agreement.
A membership interest may be used to refer to the ownership interest of a member in the LLC. The word unit is often used to reflect the membership interests of a member in the LLC. Some LLC's issue membership interest certificates. To become a new member of the LLC the consent of majority of the members is necessary. A transfer of units of an existing member does not automatically include membership into the LLC.
The sale and assignment of a majority ownership interest in a limited liability company (LLC) in Illinois can occur through an installment sales agreement while retaining a security interest in the membership interest being sold. This transaction involves transferring the majority ownership of an LLC to a buyer in installments, with the seller maintaining a security interest in the membership interest until the full payment is received. In Illinois, there are several types of installment sales agreements and retaining security interests when it comes to the sale and assignment of a majority ownership interest in an LLC. These include: 1. Installment Sales Agreement: This type of agreement allows the buyer to make payments over a specified period instead of paying the full purchase price upfront. The payment schedule is determined in the agreement, specifying the amount, frequency, and duration of payments. 2. Security Interest: In the sale and assignment of a majority ownership interest, the seller retains a security interest in the membership interest being sold. This means that if the buyer defaults on the payment obligations, the seller can take back the ownership interest and enforce their security interest rights to recover their investment. 3. Retention of Voting Rights: Along with the installment sales agreement and security interest, the seller may also retain voting rights in the LLC until all payments are made. This ensures that the seller maintains control over major decisions and protects their interests during the installment period. 4. Escrow Account: As an additional safeguard, the agreement may include the establishment of an escrow account. This account holds the payments made by the buyer until the full purchase price is paid. The seller retains control over the funds in the escrow account until the payment term is completed. 5. Personal Guarantees: In some cases, the buyer may be required to provide a personal guarantee, securing their commitment to fulfill the payment obligations. This adds an extra level of assurance for the seller in case of default. The sale and assignment of a majority ownership interest in an LLC in Illinois through an installment sales agreement and retaining a security interest is a complex process that must adhere to the state's regulations. It is crucial for both the buyer and seller to seek legal counsel to ensure compliance and protect their respective interests throughout the transaction.
