Say that an LLC was founded by four partners. Two have a 40% ownership stake in the company, two have a 10% stake.

The company manages to break even every year. No profit distributions are made.

After a period of four years, one of the 40%-ownership partners wants to exit the company. The partner decides simply to give his ownership stake back to the company.

What happens to that ownership stake? Does it go into a pot to be offered to others at a later date? Does it have to be distributed to the remaining members? Is either one legally possible under an LLC, assuming the bylaws or operating agreement spell out one of the options?

  • 3
    Blake could you edit the tags and add country tag. Regulations may differ. – Dheer Jan 20 '17 at 8:33
  • 1
    What problem is that partner trying to solve? They can certainly sell their interest to the partner(s) for "$1 and other good and valuable considerations" if the partners are willing to buy it. – keshlam Jan 21 '17 at 1:09
  • 1
  • "Does it go into a pot to be offered to others at a later date?" That doesn't make sense. If you're a 40% owner, that means you have 40% of the ownership interest. If you don't, then you're not a 40% owner. If you sum all the ownership interest percentages and don't get 100%, you did the math wrong. – David Schwartz Jan 22 '17 at 5:25
  • keshlam -- The partner would simply like to divest of all ties. A sale or transfer sounds like the correct options. @DavidSchwartz - That is what I thought would apply for LLCs, since there are no shares per se. However, we've always discussed our ownership interest in terms of "shares", where a share is a percentage point of interest, for a grand total of 100 shares across all members. I think we just need to quit using "shares" terminology internally. – Blake B. Jan 23 '17 at 20:09

There are two ways to "exit" a partnership. 1) have the other partners buy you out.2)you can "quit"a partnership and likely have a loss to report but no cash.

  • 1
    You'll need references to back that up, especially the second one. – DJClayworth Jan 20 '17 at 20:53

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.