Ask HN: Sale of LLC Interest to Co-Founder. Advice?

https://news.ycombinator.com/item?id=1682813

by llcsale • 16 years ago

2 5 16 years ago

news.ycombinator.com

Hey HN!

LONG time lurker, first time posting...

Well the time has come for me to move on from my start-up, and I will be selling my interest in our LLC to my co-founder (50%). We're leaving on good terms and sale will benefit everyone in the long run.

My Question is does anyone have any advice? What tax implications are there?

We currently have just under 1M in liquid assets (Cash) and 250K in hardware.

I will be working with our attorney, tax advisor, and CFO but I always like to go into these meetings knowing what I want to get out of them.

Do you think I should bring in outside council?

Everything is operating under good terms right now so I really don't want to rock the boat too much.

Thanks in Advance.

gojomo2• 16 years ago

You should talk to another counsel, who has only your interests in mind and has experience with these sorts of deals, to help make sure all relevant issues/ideas are under consideration and no avoidable mistakes are made. An expert can think of ways to structure things that save everyone costs/worries down the road.

But you can probably skip bringing them directly into the process, at least until papers are drawn up.

I think it's common in such cases for the buy-out to be paid over a period of years, if the company/remaining-investors don't have the liquidity to pay the agreed-upon price up front.

llcsale2• 16 years ago

liquidity of my co-founder is an interesting issue. We've discussed dissolving the LLC all-together and porting over our TMs and other intellectual property to a new wholly owned entity. This way we could both divvy up the current LLC's assets in a way that is acceptable to everyone.

Ex: They would maintain possession of a majority of the hardware for example I would get more cash based on the depreciated value of those hardware assets.

gojomo2• 16 years ago

Assuming the business is ongoing and profitable beyond just paying managers' salaries -- that cash balance accumulated from something, no? -- the value of the future earnings may dwarf the current assets you're focusing on.

Or not -- depends on a lot of things including risk, margins, and so on. But the value of a profitable business is a lot more than its book value.

rach• 16 years ago

Like gojomo said, you should definitely get external legal counsel, who has your best interest in mind. Also, the value of your startups assets are worth the investment.

Ask HN: Sale of LLC Interest to Co-Founder. Advice?

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