Ignore the following article if you are the only member of your Arizona LLC.

What is a multi-member LLC’s most important document?  It’s not the Operating Agreement, although a good Operating Agreement is a very important document for a multi-member LLC because it sets out in a binding written agreement important rights and obligations of the members such as who the members are, how much of the LLC each member owns, if a member is obligated to contribute money or property to the company, how to call meetings and the procedures that must be followed for the members to approve company actions.

The multi-member LLC’s most important document is a comprehensive Buy-Sell Agreement because it creates a legal road map for how one or more members and the company can consummate an “LLC divorce.”

If an Arizona LLC does not have a Buy-Sell Agreement, the members of a multi-member LLC are stuck with each other till “death do them part” and thereafter.  Even death doesn’t create an escape mechanism because the person or persons who inherit the membership interest of the deceased member also inherit the dispute or problems that existed before the death of the member.

People frequently contact me and ask how can they force a member to leave an Arizona LLC or how do they get rid of a member with whom they never agree.  The sad answer is the members are stuck with each other for the life of the LLC.  Arizona statutes do not contain a method for one member of an Arizona LLC to acquire involuntarily the interest another member.

Too many times I have witnessed people throw huge amounts of money at lawyers to litigate a company divorce.  It’s tragic because all the mental stress and aggravation and waste of money and time could have been avoided if the members had only done what prudent business people do – signed a good Buy-Sell Agreement.  Wouldn’t you rather spend $10,000, $25,000 or $50,000 to purchase another member’s interest in the LLC than give that money to a lawyer to sue in Superior Court for a partition or judicial dissolution of the company.

We all know that the divorce rate among married couples in the U.S. is greater than 50%.  The divorce rate among multi-member LLCs is even higher so it makes sense for multi-member LLCs to plan during the start-up phase (or any time) for the possibility that one day one or more members will want out or be at odds with one or more other members.  A Buy-Sell Agreement is an agreement signed by all of the members or by a majority member and minority members that contains a list of triggering events that can give the company and/or members an option to buy or sell a membership interest or require a mandatory purchase.  Common triggering events include death or termination of employment of a member.  The Buy-Sell Agreement can also give a member an option that will result in a member selling all of the member’s interest in the company to either the LLC or another member or members.

For a detailed discussion of LLC Buy-Sell Agreements, including 13 common triggering events, and how to determine the purchase price, see my article called “A Multi-Member LLC’s Most Important Document: Why Multi-Member LLCs Must Adopt a Buy Sell Agreement.”

P.S.  If the only two members of an Arizona LLC are a husband and wife, they do not need a Buy-Sell Agreement because divorce law includes an LLC “divorce.”

How to Hire Richard Keyt to Prepare Your LLC’s Buy-Sell Agreement

To hire Richard Keyt to prepare a Buy-Sell Agreement for your Arizona LLC, do the following:

Please call Richard (480-663-7478) or his son LLC attorney and former CPA Richard C. Keyt (480-664-7472) if you have any questions about Buy-Sell Agreement or you are ready to get started.