Can You Sell an LLC: Everything You Need to Know
If wondering, “can you sell an LLC,” the answer is yes, but in order to sell your LLC, you need an actual buyer – and you need to agree on the sale price.3 min read
2. Buy-Sell Agreement
If wondering, “can you sell an LLC,” the answer is yes. However, remember that in order to sell your LLC, you need an actual buyer – and you need to agree on the sale price. Therefore, you might need a professional who can help value your business. Keep in mind that a buyer might not want to purchase the entire LLC, and might only want to purchase a part of it, i.e., the LLC assets. There are some implications when it comes to selling your LLC, including financial, legal, and tax issues, therefore, it is best to hire a lawyer who can assist you in the process.
It is best to plan ahead to ensure that you stay ahead of any issues that could arise during the process of the sale. It is also important to include buy-sell provisions in your operating agreement, as those provisions are legally binding and can assist in the event that a legal dispute arises between you and the seller.
Transferring Ownership of Your LLC
Several LLCs transfer ownership at some point during their lifetime.
The transfer of ownership can happen for many reasons, including the following:
- A member wants to leave the company
- A member dies or becomes disabled
- A member divorces, i.e., if a wife was a member, and the husband wins membership rights in the divorce decree
- The member(s) choose to sell the entire business
The procedure for selling your LLC will depend on whether you are planning to transfer the entire LLC over to another, or if you are transferring partial rights to another, i.e., new member joining the LLC or a member purchasing the membership rights from only one member of an LLC.
The members of an LLC are also referred to as the owners. Each member owns a piece of the LLC, and the percentage in which each member owns depends on a couple of things: the capital contribution provided by the member, or the percentage agreed upon in the LLC Operating Agreement.
This agreement will help you through the process of an LLC interest transfer. Since the operating agreement is a legally binding agreement, it can be used to identify the procedures for transferring ownership in your business (buy-sell provision).
However, your LLC might also have a separate buy-sell agreement.
This agreement will contain only those buy-sell provisions that must be looked to when transferring membership rights in the LLC. Therefore, whereas the operating agreement lays out several different decision-making processes, the buy-sell agreement will only specify the guidelines regarding the sale of your LLC or the partial sale in membership rights.
Such buy-sell provisions will assist in placing a certain value on the business, which will help identify the amount of money to be paid when purchasing a piece of the LLC. The provisions might also identify restrictions on who can become a member, and if the existing member must sell his or her interest rights to another existing member.
If you don’t have an operating agreement or a buy-sell agreement, then the state statute applies. You will want to ensure that you are satisfied with the state laws, as such laws might not provide the best outcome for your LLC.
With that said, the buyer and seller could also enter into an agreement at the time of sale, one in which adopts its own rules and regulations that are distinct from state statutes.
Some states require that the LLC be dissolved if a member chooses to sell his or her rights in the company. If this is the case, it is best to speak to an attorney who can assist in the transfer process to prevent an involuntary dissolution of your business.
It is also a good idea to draft an operating agreement as soon as possible to prevent issues like this, particularly when it comes to the transfer or sale of your LLC.
If you need help selling your LLC, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with, or on behalf of companies like Google, Menlo Ventures, and Airbnb.