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.
Rhode Island Buy Sell or Stock Purchase agreement is a legally binding contract between individual members covering membership units in a Limited Liability Company (LLC) in the state of Rhode Island. This agreement provides a framework for buying, selling, or transferring membership units in an LLC, while also offering an option to fund the purchase through life insurance. The Rhode Island Buy Sell or Stock Purchase agreement offers several types of agreements based on the specific needs and requirements of the members involved. These include: 1. Cross-Purchase Agreement: This type of agreement allows individual members of the LLC to buy or sell membership units amongst themselves. In this scenario, each member has the option to purchase the membership units of another member, ensuring a smooth transition of ownership in the event of death, disability, or retirement. 2. Entity Redemption Agreement: In this agreement, the LLC itself purchases the membership units of a departing or deceased member. The LLC uses its funds to buy back the units, ensuring continuity and preventing the need for members to find external buyers. 3. Wait-and-See Agreement: This agreement allows flexibility by providing both the option to execute a cross-purchase or entity redemption agreement, based on the circumstances. The agreement outlines the procedure to follow based on the triggering event, giving members the opportunity to determine the best approach at the time. The inclusion of an option to fund the purchase through life insurance is a crucial aspect of these agreements. By utilizing life insurance policies, the members can financially secure the purchase of membership units without placing an undue burden on cash reserves. Life insurance provides the necessary funds to ease the financial strain on the buying party, ensuring a seamless transition of ownership. The Rhode Island Buy Sell or Stock Purchase agreement also addresses important details such as the valuation of membership units, payment terms, dispute resolution mechanisms, and the responsibilities of each member throughout the process. It ensures that the rights and obligations of all parties involved are protected and provides a clear framework for the buy-sell process. Whether opting for a cross-purchase, entity redemption, or wait-and-see agreement, Rhode Island's Buy Sell or Stock Purchase agreement with an option to fund the purchase through life insurance provides a comprehensive solution for LLC members. It offers flexibility, protection, and financial security, giving members peace of mind when it comes to the future ownership and management of their company.
