How to Sell Shares of an LLC

LLCs technically do not have shares

A limited liability company (abbreviated and often referred to simply as an LLC) is a simple form of business entity that limits the liability of the owners from the debts and obligations of the company. LLCs are owned by members and members are said to have an interest in the LLC. LLCs do not technically have shares and to refer to LLC membership interests as shares is inaccurate. An interest in an LLC can be easily sold via a purchase agreement.

Instructions

1. Check your operating agreement, if you have one. Although LLCs that consist of more than one member are not legally required to have an operating agreement in place, they really should An operating agreement outlines the ownership interests in the LLC as well as how the LLC is managed and how profits are distributed. LLC operating agreements also serve as a buy-sell agreement to limit how and when LLC interests may be sold. Before you consider selling your interest in an LLC, check your operating agreement. If you are the sole member, then you may skip this step.

2. Negotiate the transaction. Once you have a buyer interested in the member interests of an LLC that you own, you will need to negotiate a purchase price and a closing date for the transaction. Some buyers will also request other terms to the sale, such as private financing terms or a covenant not to compete.

3. Complete a purchase agreement. A purchase agreement will outline the terms agreed to in Step 2. You should have your attorney draft the purchase agreement or review one before you execute it.

4. Deliver a bill of sale. Once the transaction has closed, a bill of sale should also be signed. A bill of sale functions as a receipt for the transaction.

Tips & Warnings

• If you are part of a multi-member LLC and have signed an operating agreement, it will typically allow the other LLC members the right of first refusal to buy your interest in the LLC at a predetermined value.

References

• Bplans.com: Plan for Changes in LLC Ownership with Buy-Sell Provisions

Resources

• Sale of LLC interest template