Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company
Definition and meaning
The Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company is a legal agreement that outlines the transfer of ownership from one member (the Assignor) to another (the Assignee) within an LLC. This document establishes the specific percentage of membership interest being sold and ensures that all parties acknowledge the terms of the transfer.
Key components of the form
This agreement typically includes several essential elements:
- Names of the Parties: Identifies the Assignor and Assignee along with their addresses.
- Ownership Interest: Specifies how many units and what percentage of membership interest is being transferred.
- Consideration: The financial compensation received in exchange for the ownership interest.
- Authorization: A guarantee that the sale has been properly authorized by the remaining members of the LLC.
- Exhibits: Attachments that provide additional details, such as resolutions and agreements required to validate the assignment.
How to complete a form
To properly fill out the Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company, follow these steps:
- Enter the date of the agreement at the top of the document.
- Fill in the names and addresses of both the Assignor and Assignee.
- Specify the name of the LLC and its purpose.
- Indicate the number of units being sold and the corresponding percentage of ownership.
- State the agreed monetary consideration.
- Ensure the signatures of both parties are included at the bottom of the document.
Who should use this form
This form is typically used by members of a limited liability company wishing to sell or assign their ownership interest to another individual or entity. It is suitable for situations involving:
- Existing members wanting to divest part or all of their ownership.
- Buyers interested in acquiring a stake in an LLC.
- Parties involved in business partnerships that require formal documentation of ownership changes.
Common mistakes to avoid when using this form
When completing the Sale and Assignment of a Percentage Ownership Interest, be mindful of the following common errors:
- Failing to obtain proper authorization from other LLC members prior to the sale.
- Neglecting to verify the accuracy of ownership percentages and unit counts.
- Omitting necessary signatures or failing to witness the document as required.
- Not attaching required exhibits, such as the resolution of approval from LLC members.
What to expect during notarization or witnessing
This document may require notarization or witnessing to be legally effective. Here’s what you can expect:
- Presence of a Notary: A notary public will need to witness the signing of the document.
- Verification of Identity: Parties will need to provide valid identification to the notary.
- Affixing Notary Seal: Once witnessed, the notary will affix their official seal, confirming the legitimacy of the signatures.
Form popularity
FAQ
Look to the operating agreement. An LLC is a business entity that offers the liability protections of a corporation without the complexity of a corporate structure. Follow the operating agreement's requirements. Determine the value of your interest. Complete the remaining documentation.
Review your Operating Agreement and Articles of Organization. Establish What Your Buyer Wants to Buy. Draw Up a Buy-Sell Agreement with the New Buyer. Record the Sale with the State Business Registration Agency.
1. Divide ownership of the LLC by calculating total cash investment by the members. Give each member an ownership stake equal to his cash investment. Four members contributing $25,000 apiece would each receive a 25 percent stake in the company.
In strictly technical terms, no LLC can sell shares. Ownership in an LLC, or limited liability company, is based on a percentage of the company not by the number of shares owned.However, in practical terms an LLC can operate very similarly to a corporation that can sell shares.
The sale of a single-member LLC is typically handled as an asset sale. The proceeds are passed through to the owner to be taxed on the owner's personal income tax return. Multi-member LLCs and LLCs that choose to be taxed as an S-Corp or C-Corp can be sold under an entity sale or an asset sale.
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.
An LLC member can usually assign some or all of their interest in the LLC. If the member assigns their entire membership interest, the person taking the interest, called the assignee, steps into the shoes of the LLC member who is transferring the interest, called the assignor.
Review the Operating Agreement. Understand State Requirements. Determine New Member Rights. Make an Offer and Draft a Purchase Agreement. Update the Operating Agreement and Capital Accounts Ledger. Update State-Required Forms.
Unlike most business organizations, absent an agreement by all of the members of the LLC, ownership percentage has no real effect in terms of the governance and financial benefits. To increase the traditional benefits associated with ownership, control and financial return, you need to amend the operating agreement.