Membership Interest Purchase Agreement

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When buying or selling an interest in an LLC, a handshake, informal email, or written exchange is not enough. A Membership Interest Purchase Agreement (MIPA) is essential to ensure the terms of the transaction are clear, enforceable, and legally sound. A MIPA governs the sale and transfer of ownership interest in an LLC from a member to another party. Whether for a full or partial sale of the interest, the MIPA sets forth the terms, rights, and obligations for the parties involved and guides the transaction.

Clause	Purpose	What It Covers
Purchase Price & Payment Terms	Sets the financial structure of the deal.	Total purchase price Payment method (e.g., wire transfer) Timing/schedule- Price adjustments or contingencies
Ownership & Rights Transfer	Defines exactly what ownership interests are being transferred.	Percentage of membership interest Voting rights- Profit/loss distributions
Due Diligence & Representations	Protects the buyer by requiring full and accurate disclosures from the seller.	Financial statements Liabilities and debts Company’s legal standing and compliance
Indemnification	Allocates responsibility for post-closing issues.	Coverage for breaches or misrepresentations Legal costs Time limits and liability caps
Non-Compete & Confidentiality	Prevents misuse of sensitive business information post-sale.	Restrictions on competing activities Protection of proprietary information and trade secrets
Governing Law & Dispute Resolution	Establishes how legal issues will be handled.	Choice of law- Jurisdiction Arbitration or mediation process

A well-drafted MIPA ensures that the Seller can exit cleanly with limited liability and that the Buyer is properly introduced to the business as a member with all the rights that were represented to be sold. MIPAs also have to be drafted in accordance with an LLC’s Operating Agreement as a sale of membership interest that conflicts with a company’s Operating Agreement may be considered void. Therefore, it is imperative to have an attorney who can interpret and understand the restrictions of an Operating Agreement to assist with the drafting of your MIPA.

TCLG is well-equipped to review, draft, or negotiate a MIPA to ensure compliance with the applicable Operating Agreement and to protect your interest whether you are buyer seeking security or a seller looking to cash in on your ownership. For assistance with your Membership Interest Purchase Agreements: