Interest Purchase Agreement: Everything: You Need to Know
An interest purchase agreement expresses ownership of a limited liability company and gives you voting and interest in the company.3 min read
Membership Interest Purchase Agreement
If you have a private limited liability company (LLC) in the United States, you might encounter a long-form agreement for purchasing and selling outstanding membership interests.
Drafted in favor of the buyer, the agreement assumes that there is a single buyer and seller. It also assumes that the signing and closing of the transaction are not simultaneous.
Transferring an LLC Interest Agreement
You cannot sell or gift the ownership interest or interest agreement used for an LLC to another party. This is unlike shares of stock in a corporation. However, you can transfer ownership interests in LLCs to another person only if members of the partnership agree and state laws let the LLC have full-partner substitutions.
In certain cases, the law lets you transfer ownership interests, but this transaction doesn't allow the new person any rights to participate in operating the LLC. The individual only has the right to share in profits or losses.
A contract agreed upon between partners or members of a company is an operating agreement. This document states that members agree in writing to transfer ownership interest to the new party.
You should also draft a sales agreement between you and any authorized party to receive your share of the company. There is no specific format on the transfer of ownership interest within an LLC.
When writing the sales agreement, you should include the following:
- Mention the terms of the transfer.
- Include the date, interest percentage, and sales price.
- Sign and notarize the document.
Afterward, consult a LLC statute in the state where the LLC began. You should do this if your LLC does not have an operating agreement that mentions a buying and selling provision or if you cannot reach an agreement to transfer your interest with other members.
Complete the process by following owner transfer provisions based on your state's law. Provide other members with a written formal notice about transferring your interest.
LLC Membership Interest Purchase Agreement Contracts
When forming an interest purchase agreement contract, you should make sure the document specifies certain aspects. Some examples include the following:
- Include the name and address of the LLC as well as the other party entering into the agreement. Include the date when this takes place.
- State what the buyer intends to purchase from the LLC. Mention what the buyer will receive in transferable membership interests.
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