Operating Agreement - Valuation of Membership Wording

January 21, 2025

by a searcher in St. Louis, MO, USA

Going into business with 4 partners (me/spouse + 2 others). Currently, 3 of us have 20% ownership each, and the 4th has 40%. What are key items to include in the operating agreement and more specifically, how should the valuation of membership be structured/worded if one or multiple owners exit?

0 Likes

1 Reply

21 Views

Replies

Reply by a professional
from University of Virginia in Holmes, NY 12531, USA

That's a good - albeit quite broad question - and there are several approaches. You're going to want an operating agreement that works, among other items to (1) preserve some decision making balance (i.e. probably don't give the 40% holder carte blanche); (ii) addresses the mechanics of capital calls given unequal ownership, as well as consequences of failure to contribute, (iii) as you well note, clearly define buy-sell triggers and establish the valuation methodology, (iv) sets out clear guidance on what transfers are permissible and the extent to which the company or the remaining members will have right of first refusal, (v) determines the extent of minority protection, e.g., will there be drag-along, tag-along, or neither? and (vi) usually always wise to consider estate planning. Please don't hesitate to drop me a note at redacted if you'd like chat some on specifics. Best, Matt

Join the discussion