LEGAL LLCs are usually pretty simple. Usually, he has to get your agreement to do anything that dilutes you. Profits flow through as income to you. It is a

LEGAL LLCs are usually pretty simple. Usually, he has to get your agreement to do anything that dilutes you. Profits flow through as income to you. It is a bit annoying on the majority owner because (a) it is hard to raise capital and (b) you've got to file K-1s promptly every January so I can see why he'd want to get it all back. ECONOMICS So he basically values the business at $300K ($4.5K / 1.5%). My rough rule of thumb is that small stakes in small stable business should be worth around x3 ARR. If it is very profitable, it is worth a bit more. If not, it is worth a lot less. If you can, you should ask him to send over the financial (P/L, balance sheet) and ask tax filing for last year. If he says no, check the operating agreement and see what it says you are entitled to (if anything) but basically ask him how you can judge what the shares are worth without seeing the books. Personally, if he is willing to give you the books, I'd say that's a good sign that he is offering a buy out to make his life easier not grab the profits. PRACTICAL The main problem with arguing a majority owner about getting bought out is that he can always eat up the profits by paying himself more, especially if it is pretty small. The important question is why he wants the equity back. This is just a negotiation so you want to understand why he wants to equity back and make a positive case for him to either pay you a fair value for it or let you keep it. Consider framing your equity share as lost wages. Something like, "I took a $10K pay cut to earn that equity. I believe in you and what your doing and would like to stay in and share in the profits. What can I do to help make that happen?" Consider exchanging the equity to a royalty so that he writes you a check every quarter based on revenue up to some limit (say x3-5 what he would pay today). Companies really can only sustain a 5% royalty on gross revenue and it would be divided between everyone he is buying out. If he wants to convert to a C corp to raise money, then you could offer to convert to Common in the new corp but I'd tend to get my money out. FINALLY There is a tendency for small business owners (me included) to feel entitled to a large share of the profits to value their contributions above those of the people that have worked for them. We tend to take lot more risk -- as an owner, you are usually the last person to get paid. You have to (politely) make your case for yourself to counteract that. If you are an engineer, I think the easiest/cheapest thing you could offer him as an incentive to think of you as someone he wants as a partner is help with hiring. It could be very useful to him when recruiting if he could point candidates to you as a closer. You'd have good standing to act as a reference for him.