When two or more parties go into business together and create an LLC in Portland, they may expect their new company to be beneficial to all parties for many years to come. However, after a number of months or years, some business ventures become untenable and one or multiple members of the company will decide to leave the company.
The tool that facilitates that separation is known as a buyout agreement. Without a buyout agreement in place to handle the departure of one or more members, the state may require the LLC to shut down altogether.
There are many reasons to buyout a member’s interest including but not limited to bankruptcy, retirement, divorce, or loss of license. Almost all LLCs, with the exceptions of businesses with one owner, married owners, or parent/child owners, should create a buyout agreement to specify how ownership will be transferred and who is allowed to purchase a member’s interest. The agreement will also detail how ownership interest is valued and how payment will be made for the withdrawing member’s interest. A buyout agreement may even include terms that forces the LLC to buy the interest of a departing member.
Once both sides agree to the terms, they execute the agreement and part ways, generally on good terms with the potential to do business again in the future. If you are a part-owner of an LLC, an attorney specializing in business law can help you draft a buyout agreement. With an agreement in place, you and the other co-owners of your business will be prepared if someone leaves.