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. |
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| Ownership & Rights Transfer | Defines exactly what ownership interests are being transferred. |
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| Due Diligence & Representations | Protects the buyer by requiring full and accurate disclosures from the seller. |
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| Indemnification | Allocates responsibility for post-closing issues. |
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| Non-Compete & Confidentiality | Prevents misuse of sensitive business information post-sale. |
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| Governing Law & Dispute Resolution | Establishes how legal issues will be handled. |
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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:
