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.
Rhode Island Buy Sell or Stock Purchase Agreements are legally binding contracts that facilitate the purchase or sale of membership units in a Limited Liability Company (LLC). These agreements often include an option to fund the purchase through life insurance, providing financial security to the parties involved. In Rhode Island, there are various types of Buy Sell or Stock Purchase Agreements covering membership units in an LLC. Here are some examples: 1. Cross-Purchase Agreement: This type of agreement involves each individual member of the LLC purchasing life insurance policies on the lives of the other members. In the event of a member's death, the surviving members use the insurance proceeds to buy the deceased member's units. 2. Redemption Agreement: In this agreement, the LLC itself undertakes to purchase the life insurance policies on the lives of the members. Upon a member's death, the LLC uses the insurance proceeds to buy back the deceased member's units. 3. Hybrid Agreement: This agreement combines elements of both cross-purchase and redemption agreements. It offers flexibility, allowing individual members and the LLC to hold life insurance policies on the lives of the members. The decision on which entity purchases the policies depends on factors such as tax considerations and cost-effectiveness. Rhode Island Buy Sell or Stock Purchase Agreements covering membership units in an LLC with an option to fund the purchase through life insurance typically address important details, such as: a. Identification of the parties involved: The agreement clearly identifies the LLC members, their respective ownership interests, and the life insurance policies owned by each member. b. Purchase price and valuation: The agreement outlines how the purchase price for the membership units will be determined, considering factors like the value of the LLC, its assets, liabilities, and future earning potential. c. Funding mechanism: It specifies the option to finance the purchase through life insurance, including details on the policy ownership, beneficiary designation, and any necessary trusts or agreements accompanying the insurance policies. d. Triggers for the buy-sell provision: The agreement states the events or triggers that activate the buy-sell provision, such as death, disability, retirement, or voluntary departure of a member. e. Purchase process and terms: The agreement outlines the process for executing the buy-sell provision, including the timeframes, communication protocols, and any conditions for the purchase of membership units. f. Dispute resolution: It addresses how any conflicts or disagreements will be resolved, such as through mediation, arbitration, or litigation, to ensure a fair and efficient resolution process. In summary, Rhode Island Buy Sell or Stock Purchase Agreements provide a framework for the purchase or sale of membership units in an LLC, with the added option to fund the transaction through life insurance. These agreements protect the interests of LLC members and provide financial security through the proceeds of life insurance policies. The flexibility of different types of agreements allows parties to choose the structure that best suits their unique circumstances and goals.
