New York Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company

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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

Every equity owner of an LLC is called a Member and they own a percentage of the company. If one of the Members wants to sell their ownership interest to a buyer, they can do this through a sale of an LLC membership interest agreement.

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.

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.

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.

A good starting point for establishing ownership percentage for an LLC is to first settle on what amount of capital that is required to start the business. After you have this reference point, you can simply divide from each members' initial contribution to calculate their respective ownership positions.

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.

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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New York Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company