North Carolina Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company

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Description

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.

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FAQ

Assignment of interest takes place when a company is formed and the members or owners decide on the ownership percentages they will each hold. It also occurs when a member decides to leave the company and transfer their interest to another.

LLC ownership percentage is usually determined by how much equity each owner has contributed. The ownership interest given to each owner can depend on the need of the limited liability company and the rules of the state where the LLC has been formed.

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.

In the case of corporations, an ownership interest is represented by ownership of voting stock. In the case of partnerships or limited liability companies, an ownership interest is represented by total interest in capital and profits.

The term member refers to the individual(s) or entity(ies) holding a membership interest in a limited liability company. The members are the owners of an LLC, like shareholders are the owners of a corporation. Members do not own the LLC's property.

Members invest money into the LLC and get a share of the company in return. Those with an ownership interest receive a share of the LLC's profits and losses.

You must appraise the total value for the company first, and then multiply it by your ownership percentage to find the value of your share. The two most commonly used valuation methods are the market value method and the income method. The LLC's operating agreement may specify the valuation method to be used.

Assignment of interest in LLCs happens when a member communicates to other members his/her intention to transfer part or all of his ownership rights in the LLC to another entity. The assignment is usually done as a means for members to provide collateral for personal loans, settle debts, or leave the LLC.

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North Carolina Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company