Selling Shares To Partners In A LLC

[aesthetics]

I need a little bit of advice...I am planning on leaving the company that I am part of. Due to lack of pay, partners, etc.

There are currently 3 shareholders including my self in a LLC where we focus mainly on printing and design services.

What am I entitled to as what my company shares are worth? Should I expect to get the value of the company? If so, how do I find the value of the company? Does it just go by the book value of the company? What is a proper method to figure out what I should get out of my shares?

[ArcSine]

Your first stop is your LLC's Operating Agreement. This is the document which serves as a contract between the members ('shareholders', as you say), by and among themselves, and with the entity itself.

Most LLC OAs have a 'divorce' section which spells out the procedures for member departures and buyouts. Typically included in this section is the agreed-upon valuation methodology for pricing a departing member's equity.

The provisions of the OA will govern unless the members mutually agree to an amendment.

Hope this helps just a bit, and best of luck in your next venture.

[njevic]

ArcSine is right - the Operating Agreement will be the governing document for selling shareholders.

As far as values - the simple back-of-the-envelope methodology for valuing firms is a multiple of EBITDA. If you've been in the industry a bit, you should have a sense of what the multiples are. Of course, there are a lot of variables that affect the multiple - consistency of cash flows, capex, customer concentration just to name a few.

Once you have that number, and don't forget to add back you compensation, if you were taking any, the resulting product of the multiple and EBITDA is the Enterprise Value. To get to the equity value, you will need to deduct the debt and add cash. Then take the equity value and multiply it by the percent ownership you have.

Nothing is ever that simple, but at least it will give you a frame work.

If the company does not have the cash to pay you, take a note, but make sure it's secured. If you partners just outright reject you, see if there are any restrictions to selling your interests to a third party (not that there will be a big market for that), but you could use the the threat of selling shares to a competitor to get them to work with you (I know it's hardball, but ...).

Good luck,
Nick