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Could you elaborate on issues if I add him to the LLC? Just so I know the caveats of going down that path.
by floridageorgia 8y ago
Could you elaborate on issues if I add him to the LLC? Just so I know the caveats of going down that path.
- piker 8y agoIt's likely technically a security under federal law, so exchanging the interest for value opens you up to the same types of issues if you just sold it to a third party. That means a lot of risk disclosure, etc. You'll also have some duties to him on an ongoing basis and you'll need to prevent him from being able to transfer, etc. That can get very tricky in the presence of transfers by law (e.g. pursuant to divorce). A good corp lawyer will have precedent addressing these things, but it will cost you. If you have to go this route make sure you have the ability to boot him at your discretion (rendering it basically worthless) or at a minimum, on "cause" by him. You'll need a confi in there in addition to carving out most of the default LLC rights under the relevantly statute (ideally Delaware). Just give the guy cash.
- floridageorgia 8y agoThank you so much for the insight.
- tmaly 8y agoYou will have to add him on the IRS form so you will have to deal with tax filings with him involved. Also, most operating agreements have all these clauses to cover cases where he wants to sell his share to someone else. Say he sells to someone with a lot of money and big lawyers. There is a small possibility in this case that you would be spending most of your time and money in a court setting. It is best to try to just pay him to walk away.