Members of limited liability companies (LLCs) have ownership interests as well as certain rights and responsibilities. Sometimes, LLC members will remain in perpetuity. However, there can also be circumstances when a member will choose to leave the organization. In that situation, the remaining members will often turn to the LLC’s buyout agreement to manage the member’s ownership interest. As a business owner, you need to know: What should be in my Florida LLC buyout agreement?
What is an LLC Buyout Agreement?
When a Florida business owner decides to form an LLC, they will usually develop an operating agreement. This agreement will set out how the LLC will be run and the members’ roles, rights, and responsibilities. Another feature the operating agreement may have is the buyout agreement.
An LLC buyout agreement is a provision that details what will happen if a member decides to leave the LLC. This information may be included in the operating agreement or a separate document.
What Kind of Information is in a Buyout Agreement?
Buyout agreements will vary according to the LLC and its requirements. Although the name implies that members will purchase or “buy out” the departing member’s ownership interests, that may or may not be the case. Some buyout agreements may require the LLC to end upon a member’s departure, while others may offer the remaining members the opportunity to purchase the departing member’s interests. The idea behind these agreements is for members to consider the future and how they want to manage departure.
Buyout agreements typically include provisions regarding:
- How to value a member’s ownership interests.
- Events that may cause a buyout to occur.
- What happens when a member decides to resign.
- The impact of a merger or sale on a member’s interest.
- What will happen when a member needs to be forcibly removed.
If you plan on adding this provision to your operating agreement or creating a separate buyout document, you should consult with an experienced Florida business attorney. Your lawyer can help you explore the possible scenarios and determine how to create an effective agreement that best protects your interests.
What Will Happen if the LLC Doesn’t Have a Buyout Agreement?
If your LLC operating agreement doesn’t include a buyout provision and you don’t have a separate agreement, Florida law will govern what will happen when a member leaves. If you don’t have a buyout agreement, you should consult with an experienced Florida business attorney to discuss how your business may be impacted.
Does My LLC Need a Buyout Agreement?
Florida LLCs can be a highly beneficial business structure. However, it’s essential to prepare for their future. LLC buyout agreements provide a way to consider potential issues and plan for member departures. However, these agreements should be prepared with the assistance of an experienced Florida business attorney. Your counsel can help you evaluate your LLC’s business needs and prepare for the future.
Contact a Florida Business Attorney Today
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with commercial leasing, business, and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.