Agreed Upon LLC Value Buy-Out Provision

I recommend in the Pre-Organization Questionnaire Letter that clients consider an “agreed upon” value buy-out provision for their LLC. An “agreed upon” value buy-out has LLC owner/members agree on a specific dollar amount value for the LLC (assets, good will, everything) and that value is then divided according to the percentage ownership of the owner/members to find the value of each owner/member’s individual LLC interest.

I think many times this is the fastest, fairest, and least expensive way to handle LLC valuation questions. There is a mechanism for updating LLC value on a regular basis and the LLC Operating Agreement always has a second, fallback, buy-out provision if the value is not timely updated (see Workable Appraisal Process for LLC).

When I organized "Form" LLCs I did not offer an agreed upon value buy-out.

“Expert opinion ... is only an ordinary guess in evening clothes.” Judge Curtis Bok in Earl M. Kerstetter, Inc. v. Commonwealth, 404 Pa. 168, 173, 171 A.2d 163, __ (1961).