In the absence of a valid restriction, a member in an LLC may transfer his/her interest in the LLC (usually expressed in membership units ) to anyone. Restrictions on the transfer of membership units are valid if they are not unreasonable. This form provides that the LLC has the right to purchase a members membership units upon his death. The LLC can fund this transaction through a life insurance policy on the members life with the proceeds going to the LLC. The proceeds will then be used to buy the deceased members membership units.
A restriction on the right to transfer membership units is not effective against a purchaser of the unit unless the purchaser knows of the restriction. Such a restriction can be conspicuously noted on the membership certificates.
This form is set up as a Buy Sell Agreement between the LLC and a key member. It applies in the case of the death, disability, retirement or offer of member to sell his membership units during his lifetime.
This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
Keywords: New Mexico, Buy Sell Agreement, Stock Purchase Agreement, Individual Members, Membership Units, Limited Liability Company — LLC, Option, Life Insurance Introduction: A Buy Sell Agreement is a crucial legal document that outlines the terms and conditions for the purchase and sale of membership units in a Limited Liability Company (LLC). In New Mexico, such agreements can be formed between individual members of an LLC, and they may also incorporate an option to fund the purchase through life insurance. This article explores the different types of New Mexico Buy Sell or Stock Purchase Agreements between individual members covering membership units in an LLC, with an emphasis on the option to fund the purchase through life insurance. 1. Cross-Purchase Buy Sell Agreement: A Cross-Purchase Buy Sell Agreement is a type of agreement where individual members of an LLC agree to purchase the membership units of another member in the event of their death, disability, retirement, or voluntary withdrawal. This agreement allows the remaining members to distribute the ownership among themselves, avoiding potential conflicts and ensuring a smooth transition. The option to fund the purchase through life insurance offers a financial resource to aid in the transaction. 2. Entity-Purchase Buy Sell Agreement: An Entity-Purchase Buy Sell Agreement, also known as a Stock Redemption Agreement, involves the LLC itself purchasing the membership units of a member. In this arrangement, the LLC takes out life insurance policies on each member, and if a member dies, the LLC uses the insurance proceeds to buy back the deceased member's units. This agreement enables the company to maintain control while ensuring the fair transition of ownership. 3. Wait-and-See Buy Sell Agreement: A Wait-and-See Buy Sell Agreement combines elements of both the Cross-Purchase and Entity-Purchase agreements. Individual members of an LLC have the option to choose whether they want to purchase the membership units personally or have the LLC perform the purchase. In cases where the option to fund the purchase through life insurance is exercised, the insurance proceeds can be used by the purchasing party to buy the units from the deceased member's estate. 4. Hybrid Buy Sell Agreement: A Hybrid Buy Sell Agreement is a customized agreement that incorporates elements from multiple types of buy sell agreements to suit the specific needs of the LLC and its members. This type of agreement may involve a combination of cross-purchase and entity-purchase arrangements, with the option to fund the purchase through life insurance varying among individual members. Conclusion: New Mexico Buy Sell or Stock Purchase Agreements between individual members covering membership units in an LLC serve to protect the interests of both the LLC and its members. By incorporating the option to fund the purchase through life insurance, these agreements provide financial security and a smooth transition of ownership in the event of a member's departure.Keywords: New Mexico, Buy Sell Agreement, Stock Purchase Agreement, Individual Members, Membership Units, Limited Liability Company — LLC, Option, Life Insurance Introduction: A Buy Sell Agreement is a crucial legal document that outlines the terms and conditions for the purchase and sale of membership units in a Limited Liability Company (LLC). In New Mexico, such agreements can be formed between individual members of an LLC, and they may also incorporate an option to fund the purchase through life insurance. This article explores the different types of New Mexico Buy Sell or Stock Purchase Agreements between individual members covering membership units in an LLC, with an emphasis on the option to fund the purchase through life insurance. 1. Cross-Purchase Buy Sell Agreement: A Cross-Purchase Buy Sell Agreement is a type of agreement where individual members of an LLC agree to purchase the membership units of another member in the event of their death, disability, retirement, or voluntary withdrawal. This agreement allows the remaining members to distribute the ownership among themselves, avoiding potential conflicts and ensuring a smooth transition. The option to fund the purchase through life insurance offers a financial resource to aid in the transaction. 2. Entity-Purchase Buy Sell Agreement: An Entity-Purchase Buy Sell Agreement, also known as a Stock Redemption Agreement, involves the LLC itself purchasing the membership units of a member. In this arrangement, the LLC takes out life insurance policies on each member, and if a member dies, the LLC uses the insurance proceeds to buy back the deceased member's units. This agreement enables the company to maintain control while ensuring the fair transition of ownership. 3. Wait-and-See Buy Sell Agreement: A Wait-and-See Buy Sell Agreement combines elements of both the Cross-Purchase and Entity-Purchase agreements. Individual members of an LLC have the option to choose whether they want to purchase the membership units personally or have the LLC perform the purchase. In cases where the option to fund the purchase through life insurance is exercised, the insurance proceeds can be used by the purchasing party to buy the units from the deceased member's estate. 4. Hybrid Buy Sell Agreement: A Hybrid Buy Sell Agreement is a customized agreement that incorporates elements from multiple types of buy sell agreements to suit the specific needs of the LLC and its members. This type of agreement may involve a combination of cross-purchase and entity-purchase arrangements, with the option to fund the purchase through life insurance varying among individual members. Conclusion: New Mexico Buy Sell or Stock Purchase Agreements between individual members covering membership units in an LLC serve to protect the interests of both the LLC and its members. By incorporating the option to fund the purchase through life insurance, these agreements provide financial security and a smooth transition of ownership in the event of a member's departure.
