“Choice of entity” may be the most mercilessly beaten dead horse of all. No matter which criteria folks emphasize, all agree that there is a choice to be made. Some emphasize one set of criteria, others emphasize slightly different sets of criteria.
And if it is a distribution, it seems that payment should be governed by distribution provisions in the partnership agreement.In the partnership/LLC world, the provisions are in the Partnership Agreement or Limited Liability Company Agreement (an LLC Agreement).The business divorce provisions in a Shareholders Agreement will in many ways be a good template for similar provisions in a Partnership Agreement or LLC Agreement. April 29, 2016) the Delaware Chancery Court addressed a dispute between members of a tech company. We don’t know what precipitated the dispute between the IP Members and Mr.A relatively recent Delaware case highlights the perils of failing to clearly and unambiguously addressing these differences where a partner’s interest is “redeemed”. That act triggered a provision in the LLC Agreement granting the LLC the right to buy out the IP Members’ interests in the LLC (their Units).The buyout provision in the LLC Agreement stated that amount to be paid for their Units (in this case) is the Fair Market Value of their Units.
As discussed on this blog previously, distributions of partnership assets in liquidation prior to exchanges by partners are commonly called “drop-and-swap” transactions.