LLC Buy-Out Provisions

All LLCs need a buy-out provision in their LLC Operating Agreement. I offer LLC owner/members options for different buy-out provisions in the Pre-Organization Questionnaire Letter. If the matter is not addressed in the LLC Operating Agreement, the South Carolina Statutory Default Rules control and LLC value if not agreed upon will be determined by appraisers based on the statutory rules which leave room for argument and directs arguments be resoled by the court.

My goal is to reduce future LLC expense by keeping the issue from requiring attorneys and fact finders (courts, mediators, or arbitrators). When I organized “Form” LLCs, the buy-out provision depended upon the “form” I used.

I recommend a buy-out provision that enhances LLC asset and liability protection by placing creditors in the position of “wrongfully” withdrawing party (see Two (2) Tier Buy-Out for “Proper” and “Wrongful” Withdrawal), I also recommend and draft provisions to streamline and attempt to make fool proof an appraisal process for determining LLC value and for agreement on the value of the LLC (see Workable Appraisal Process for LLC and Agreed Upon LLC Value Buy-Out Provision).

“There is a useless lawsuit in every useless word of a statute and every loose, sloppy phrase plays the part of the typhoid carrier.” Elihu Root (long time friend of Teddy Roosevelt, Secretary of State, and "lawyer without peer"), The Layman’s Criticism of the Lawyer” 39 American Bar Association Report 386, 395 (1914).