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South Dakota Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance

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US-03467BG
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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.

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How to fill out South Dakota Buy Sell Or Stock Purchase Agreement Between Individual Members Covering Membership Units In A Limited Liability Company - LLC - With An Option To Fund The Purchase Through Life Insurance?

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FAQ

Advantages of a Cross Purchase Agreement A cross purchase agreement allows a smooth transition of ownership from departing partners or shareholders to others in the company. The transfer of ownership through the proceeds from life insurance is not subject to income tax.

In a cross purchase buy-sell agreement, each co-owner buys a life insurance policy on the life of the other co-owner, pays the annual premium and is the beneficiary of the policy they own.

purchase agreement is a document that allows a company's partners or other shareholders to purchase the interest or shares of a partner who dies, becomes incapacitated or retires. The mechanism often relies on a life insurance policy in the event of a death to facilitate that exchange of value.

As part of the agreement, the business buys life insurance policies on the lives of each owner. The business pays the premiums and therefore exists as the owner and beneficiary of the policy. When an employee-owner dies, that share of the company passes to the heirs of his or her estate.

An entity-purchase agreement is a buy-sell agreement between the business itself and the owners of the business. Upon a triggering event (e.g., an owner's death, disability, termination of employment), the business agrees to purchase the interest of the departing owner at an agreed-upon price.

sell agreement provides a plan for the orderly transfer of any owner's business interest. Consider a buysell agreement for your business if: You have two or more owners. You want to provide protection in the event of any owner's termination of employment, retirement, divorce, disability, or death.

Disadvantages of Cross-Purchase Buy-Sell Plans The disadvantages of cross-purchase buy-sell agreements include: Life insurance policies are not owned by the business so any cash values cannot be considered company assets. Depending on the varying ages of the business owner's actual premium payments may vary greatly.

In an entity plan, the business entity buys insurance on the life of each principal owner. In a cross-purchase plan, the individual business principal owners buy insurance on the lives of each other. The main difference is who owns the policy.

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South Dakota Buy Sell or Stock Purchase Agreement between Individual Members Covering Membership Units in a Limited Liability Company - LLC - with an Option to Fund the Purchase through Life Insurance