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Assignment of Membership Interest: The Ultimate Guide for Your LLC

LegalGPS : July 24, 2024 at 12:10 PM

As a business owner, there may come a time when you need to transfer ownership of your company or acquire additional members. In these situations, an assignment of membership interest is a critical step in the process. This blog post aims to provide you with a comprehensive guide on everything you need to know about the assignment of membership interest and how to navigate the procedure efficiently. So, let's dive into the world of LLC membership interest transfers and learn how to secure your business!

Assignment of Membership Interest Template

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Table of Contents

Necessary approvals and consent, impact on ownership, voting, and profit rights, complete assignment, partial assignment.

• Key elements to include

Step 1: Gather Relevant Information

Step 2: review the llc's operating agreement, step 3: obtain necessary approvals and consents, step 4: outline the membership interest being transferred, step 5: determine the effective date of the assignment, step 6: specify conditions and representations, step 7: address tax and liability issues, step 8: draft the entire agreement and governing law clauses, step 9: review and sign the assignment agreement.

• Advantages of using a professionally-created template
• How our contract templates stand out from the rest

Frequently Asked Questions (FAQs) about Assignment of Membership Interest

Do you need a lawyer for this, what is an assignment of membership interest.

An assignment of membership interest is a document that allows a member of an LLC to transfer their ownership share in the company to another person or entity. This can be done in the form of a sale or gift, which are two different scenarios that generally require different types of paperwork. An assignment is typically signed by the parties involved and delivered to the Secretary of State's office for filing. However, this process can vary depending on where you live and whether your LLC has members other than yourself as well as additional documents required by state law.

Before initiating the assignment process, it's essential to review the operating agreement of your LLC, as it may contain specific guidelines on how to assign membership interests.

Often, these agreements require the express consent of the other LLC members before any assignment can take place. To avoid any potential disputes down the line, always seek the required approvals before moving forward with the assignment process.

It's essential to understand that assigning membership interests can affect various aspects of the LLC, including ownership, voting rights, and profit distribution. A complete assignment transfers all ownership rights and obligations to the new member, effectively removing the original member from the LLC. For example, if a member assigns his or her interest, the new member inherits all ownership rights and obligations associated with that interest. This includes any contractual obligations that may be attached to the membership interest (e.g., a mortgage). If there is no assignment of interests clause in your operating agreement, then you will need to get approval from all other members for an assignment to take place.

On the other hand, a partial assignment permits the original member to retain some ownership rights while transferring a portion of their interest to another party. To avoid unintended consequences, it's crucial to clearly define the rights and responsibilities of each party during the assignment process.

Types of Membership Interest Transfers

Membership interest transfers can be either complete or partial, depending on the desired outcome. Understanding the differences between these two types of transfers is crucial in making informed decisions about your LLC.

A complete assignment occurs when a member transfers their entire interest in the LLC to another party, effectively relinquishing all ownership rights and obligations. This type of transfer is often used when a member exits the business or when a new individual or entity acquires the LLC.

For example, a member may sell their interest to another party that is interested in purchasing their share of the business. Complete assignment is also used when an individual or entity wants to purchase all of the interests in an LLC. In this case, the seller must receive unanimous approval from the other members before they can transfer their entire interest.

Unlike a complete assignment, a partial assignment involves transferring only a portion of a member's interest to another party. This type of assignment enables the member to retain some ownership in the business, sharing rights, and responsibilities proportionately with the new assignee. Partial assignments are often used when adding new members to an LLC or when existing members need to redistribute their interests.

A common real-world example is when a member receives an offer from another company to purchase their interest in the LLC. They might want to keep some ownership so that they can continue to receive profits from the business, but they also may want out of some of the responsibilities. By transferring only a partial interest in their membership share, both parties can benefit: The seller receives a lump sum payment for their share of the LLC and is no longer liable for certain financial obligations or other tasks.

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How to Draft an Assignment of Membership Interest Agreement

A well-drafted assignment of membership interest agreement can help ensure a smooth and legally compliant transfer process. Here is a breakdown of the key elements to include in your agreement, followed by a step-by-step guide on drafting the document.

Key elements to include:

The names of the assignor (the person transferring their interest) and assignee (the person receiving the interest)

The name of your LLC and the state where it was formed

A description of the membership interest being transferred (percentage, rights, and obligations)

Any required approvals or consents from other LLC members

Effective date of the assignment

Signatures of all parties involved, including any relevant witnesses or notary public

Before you begin drafting the agreement, gather all pertinent data about the parties involved and the membership interest being transferred. You'll need information such as:

The names and contact information of the assignor (the person transferring their interest) and assignee (the person receiving the interest)

The name and formation details of your LLC, including the state where it was registered

The percentage and value of the membership interest being transferred

Any specific rights and obligations associated with the membership interest

Examine your LLC's operating agreement to ensure you adhere to any predetermined guidelines on assigning membership interests. The operating agreement may outline specific procedures, required approvals, or additional documentation necessary to complete the assignment process.

If your LLC doesn't have an operating agreement or if it's silent on this matter, follow your state's default LLC rules and regulations.

Before drafting the assignment agreement, obtain any necessary approvals or consents from other LLC members as required by the operating agreement or state law. You may need to hold a members' meeting to discuss the proposed assignment and document members' consent in the form of a written resolution.

Detail the membership interest being transferred in the Assignment of Membership Interest Agreement. Specify whether the transfer is complete or partial, and include:

The percentage of ownership interest being assigned

Allocated profits and losses, if applicable

Voting rights associated with the transferred interest

The assignor's rights and obligations that are being transferred and retained

Any capital contribution requirements

Set an effective date for the assignment, which is when the rights and obligations associated with the membership interest will transfer from the assignor to the assignee.

This date is crucial for legal and tax purposes and helps both parties plan for the transition. If you don’t specify an effective date in the assignment agreement, your state's law may determine when the transfer takes effect.

In the agreement, outline any conditions that must be met before the assignment becomes effective. These could include obtaining certain regulatory approvals, fulfilling specific obligations, or making required capital contributions.

Additionally, you may include representations from the assignor attesting that they have the legal authority to execute the assignment. Doing this is important because it can prevent a third party from challenging the assignment on grounds of lack of authority. If the assignor is an LLC or corporation, be sure to specify that it must be in good standing with all necessary state and federal regulatory agencies.

Clearly state that the assignee will assume responsibility for any taxes, liabilities, and obligations attributable to the membership interest being transferred from the effective date of the assignment. You may also include indemnification provisions that protect each party from any potential claims arising from the other party's actions.

For example, you can include a provision that provides the assignor with protection against any claims arising from the transfer of membership interests. This is especially important if your LLC has been sued by a member, visitor, or third party while it was operating under its current management structure.

In the closing sections of the assignment agreement, include clauses stating that the agreement represents the entire understanding between the parties concerning the assignment and supersedes any previous agreements or negotiations. Specify that any modifications to the agreement must be made in writing and signed by both parties. Finally, identify the governing law that will apply to the agreement, which is generally the state law where your LLC is registered.

This would look like this:

Once you've drafted the Assignment of Membership Interest Agreement, ensure that all parties carefully review the document to verify its accuracy and completeness. Request a legal review by an attorney, if necessary. Gather the assignor, assignee, and any necessary witnesses or notary public to sign the agreement, making it legally binding.

Sometimes the assignor and assignee will sign the document at different times. If this is the case, then you should specify when each party must sign in your Assignment Agreement.

Importance of a Professionally-drafted Contract Template

To ensure a smooth and error-free assignment process, it's highly recommended to use a professionally-drafted contract template. While DIY options might seem tempting, utilizing an expertly-crafted template provides several distinct advantages.

Advantages of using a professionally-created template:

Accuracy and Compliance: Professionally-drafted templates are designed with state-specific regulations in mind, ensuring that your agreement complies with all necessary legal requirements.

Time and Cost Savings: With a pre-written template, you save valuable time and resources that can be better spent growing your business.

Reduced Legal Risk: Legal templates created by experienced professionals significantly reduce the likelihood of errors and omissions that could lead to disputes or litigations down the road.

Get Your Assignment of Membership Interest Template with a Legal GPS Subscription

How our contract templates stand out from the rest:

We understand the unique needs of entrepreneurs and business owners. Our contract templates are designed to provide a straightforward, user-friendly experience that empowers you with the knowledge and tools you need to navigate complex legal processes with ease. By choosing our Assignment of Membership Interest Agreement template, you can rest assured that your business is in safe hands. Click here to get started!

As you embark on the journey of assigning membership interest in your LLC, here are some frequently asked questions to help address any concerns you may have:

Is an assignment of membership interest the same as a sale of an LLC? No. While both processes involve transferring interests or assets, a sale of an LLC typically entails the sale of the entire business, whereas an assignment of membership interest relates to the transfer of some or all membership interests between parties.

Do I need an attorney to help draft my assignment of membership interest agreement? While not mandatory, seeking legal advice ensures that your agreement complies with all relevant regulations, minimizing potential legal risks. If you prefer a more cost-effective solution, consider using a professionally-drafted contract template like the ones we offer at [Your Company Name].

Can I assign my membership interest without the approval of other LLC members? This depends on your LLC's operating agreement and state laws. It's essential to review these regulations and obtain any necessary approvals or consents before proceeding with the assignment process.

The biggest question now is, "Do you need to hire a lawyer for help?" Sometimes, yes ( especially if you have multiple owners ). But often for single-owner businesses, you don't   need a lawyer to start your business .

Many business owners instead use tools like  Legal GPS for Business , which includes a step-by-step, interactive platform and 100+ contract templates to help you start and grow your company.

Get Legal GPS's Assignment of Membership Interest Template Now

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Assignment Of Membership Interest: Definition & Sample

Jump to section, what is an assignment of membership interest.

An assignment of membership interest is a legal document that allows members of a Limited Liability Company (or LLC) to reassign their interest in the company to a different party. LLC laws are different from state to state, so what's required in an assignment of membership agreement changes.

Typically seen when a member wishes to exit a business, the assignment of membership interest agreement is used when transferring membership interest to another person. It is possible to transfer membership of an LLC to something like a revocable trust but requires those terms and conditions to be set in the assignment agreement.

Assignment Of Membership Interest Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.1.1.2 3 dex10112.htm ASSIGNMENT OF MEMBERSHIP INTEREST , Viewed October 13, 2021, View Source on SEC .

Who Helps With Assignments Of Membership Interest?

Lawyers with backgrounds working on assignments of membership interest work with clients to help. Do you need help with an assignment of membership interest?

Post a project  in ContractsCounsel's marketplace to get free bids from lawyers to draft, review, or negotiate assignments of membership interest. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Meet some of our Assignment Of Membership Interest Lawyers

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Sale and Assignment of LLC Membership Interests

Transfers from Member to Member or to Non-Member Third Parties by David J. Willis J.D., LL.M.

Introduction

This article addresses legal points to consider when conveying a membership interest in a limited liability company from one individual to another. It does not address the initial issuance of such interests when the LLC is formed, nor sales of membership interests by an existing LLC to incoming members.

Additionally, this article addresses absolute assignments (full and final transfers) rather than collateral assignments (made only as security for a loan) which are a different topic entirely.

Assignments of this type may follow the execution of a letter of intent which provides for a due-diligence period. This article does not cover the contents of such an LOI but does address issues that should be considered by a prospective assignee in conducting due diligence. An LOI will often make reference to specific due diligence steps that a buyer will be permitted to take.

After covering definitions and applicable law, we will turn to principal points that should be considered in negotiating and drafting an assignment of LLC membership interest.

APPLICABLE LAW

Relevant statutory definitions.

Applicable law is found in the Business Organizations Code (BOC):

Bus. Orgs. Code Section 1.002. DEFINITIONS

(7) “Certificated ownership interest” means an ownership interest of a domestic entity represented by a certificate issued in bearer or registered form.

(32) “Fundamental business transaction” means a merger, interest exchange, conversion, or sale of all or substantially all of an entity’s assets.

(35)(A) “Governing authority” means a person or group of persons who are entitled to manage and direct the affairs of an entity under this code and the governing documents of the entity, except that if the governing documents of the entity or this code divide the authority to manage and direct the affairs of the entity among different persons or groups of persons according to different matters, “governing authority” means the person or group of persons entitled to manage and direct the affairs of the entity with respect to a matter under the governing documents of the entity or this code.

(41) “Interest exchange” means the acquisition of an ownership or membership interest in a domestic entity as provided by Subchapter B, Chapter 10. The term does not include a merger or conversion.

(46) “Limited liability company” means an entity governed as a limited liability company under Title 3 or 7. The term includes a professional limited liability company.

(53) “Member” means: (A) in the case of a limited liability company, a person who has become, and has not ceased to be, a member in the limited liability company as provided by its governing documents or this code. . . .

(54) “Membership interest” means a member’s interest in an entity. With respect to a limited liability company, the term includes a member’s share of profits and losses or similar items and the right to receive distributions, but does not include a member’s right to participate in management.

(64) “Ownership interest” means an owner’s interest in an entity. The term includes the owner’s share of profits and losses or similar items and the right to receive distributions. The term does not include an owner’s right to participate in management.

(69-b) “Person” means an individual or a corporation, partnership, limited liability company, business trust, trust, association, or other organization, estate, government or governmental subdivision or agency, or other legal entity, or a protected series or registered series of a domestic limited liability company or foreign entity.

(87) “Uncertificated ownership interest” means an ownership interest in a domestic entity that is not represented by an instrument and is transferred by: (A) amendment of the governing documents of the entity; or (B) registration on books maintained by or on behalf of the entity for the purpose of registering transfers of ownership interests.

A well-drafted assignment of LLC membership interest will be mindful of and consistent with these statutory terms.

Statute Authorizing LLC Membership Assignments

Foundational to the idea of a sale and assignment of LLC membership interest is the legal authority to enter into such a transaction in the first place:

Bus. Orgs. Code Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST

(a) A membership interest in a limited liability company may be wholly or partly assigned.

(b) An assignment of a membership interest in a limited liability company: (1) is not an event requiring the winding up of the company; and (2) does not entitle the assignee to: (A) participate in the management and affairs of the company; (B) become a member of the company; or (C) exercise any rights of a member of the company.

Consent by other members is required. BOC Section 101.103(s) states that a “person who, after the formation of a limited liability company, acquires directly or is assigned a membership interest in the company or is admitted as a member of the company without acquiring a membership interest becomes a member of the company on approval or consent of all of the company’s members.” BOC Section 101.105 states that a “limited liability company, after the formation of the company, may: (1) issue membership interests in the company to any person with the approval of all of the members of the company. . . .”

An additional consent requirement is found in BOC Section 101.356(c) which provides that, for the most part, “a fundamental business transaction of a limited liability company, or an action that would make it impossible for a limited liability company to carry out the ordinary business of the company, must be approved by the affirmative vote of the majority of all of the company’s members.”

Accordingly, it is advisable to accompany an assignment of membership interest with a special meeting of members that approves and ratifies the change. One or more LLC resolutions may be produced as well. All affected parties (and their spouses, even if non-members) should sign off.

What category of property is an LLC membership interest?

Regardless of the type of property owner by a limited liability company, a membership interest in the LLC is personal property:

Bus. Orgs. Code Sec. 101.106. NATURE OF MEMBERSHIP INTEREST

(a) A membership interest in a limited liability company is personal property.

(a-1) A membership interest may be community property under applicable law.

(a-2) A member’s right to participate in the management and conduct of the business of the limited liability company is not community property.

(b) A member of a limited liability company or an assignee of a membership interest in a limited liability company does not have an interest in any specific property of the company.

The characterization of an LLC membership interest as personal property is important because it also signifies what it is not . For instance, it is not a real property interest even though the LLC may own real estate. It is not a negotiable instrument subject to the Uniform Commercial Code (found in Texas Business & Commerce Code Section 3.201 et seq.). Nor is a small-business LLC membership interest usually considered to be a security subject to state and federal securities laws: “An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, [and the company agreement] expressly provide[s] that it is a security . . . or it is an investment company security.” Tex. Bus. & Com. Code Sec. 8.103(c).

The foregoing applies regardless of whether the membership interest is considered certificated or uncertificated.

Statutory Qualifications for LLC Membership

Qualifications and requirements for membership in an LLC are found in the BOC:

Bus. Orgs. Code Sec. 101.102. QUALIFICATION FOR MEMBERSHIP

(a) A person may be a member of or acquire a membership interest in a limited liability company unless the person lacks capacity apart from this code.

(b) A person is not required, as a condition to becoming a member of or acquiring a membership interest in a limited liability company, to:

(1) make a contribution to the company; (2) otherwise pay cash or transfer property to the company; or (3) assume an obligation to make a contribution or otherwise pay cash or transfer property to the company.

(c) If one or more persons own a membership interest in a limited liability company, the company agreement may provide for a person to be admitted to the company as a member without acquiring a membership interest in the company.

Rights and Duties of an Assignee

BOC Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP INTEREST BEFORE MEMBERSHIP

(a) A person who is assigned a membership interest in a limited liability company is entitled to:

(1) receive any allocation of income, gain, loss, deduction, credit, or a similar item that the assignor is entitled to receive to the extent the allocation of the item is assigned; (2) receive any distribution the assignor is entitled to receive to the extent the distribution is assigned; (3) require, for any proper purpose, reasonable information or a reasonable account of the transactions of the company; and (4) make, for any proper purpose, reasonable inspections of the books and records of the company.

(b) An assignee of a membership interest in a limited liability company is entitled to become a member of the company on the approval of all of the company’s members.

(c) An assignee of a membership interest in a limited liability company is not liable as a member of the company until the assignee becomes a member of the company.

BOC Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF MEMBERSHIP INTEREST AFTER BECOMING MEMBER

(a) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is:

(1) entitled, to the extent assigned, to the same rights and powers granted or provided to a member of the company by the company agreement or this code; (2) subject to the same restrictions and liabilities placed or imposed on a member of the company by the company agreement or this code; and (3) except as provided by Subsection (b), liable for the assignor’s obligation to make contributions to the company.

(b) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is not obligated for a liability of the assignor that:

(1) the assignee did not have knowledge of on the date the assignee became a member of the company; and (2) could not be ascertained from the company agreement.

It is important to note that these statutory rights and duties are subject to “restrictions and liabilities” that may be imposed by the company agreement.

PRELIMINARY CONSIDERATIONS

The company agreement.

When considering a transfer of LLC membership, it is important to first check the company agreement (operating agreement) to determine if there are buy-sell provisions or a right-of-first-refusal clause that must be worked through before the membership interest can be assigned. company agreements often require that before a sale and assignment of a membership interest can occur, the interest must first be offered pro rata to the other members, and/or to the company itself, before a transfer may be made to a person who is not currently a member. Unless waived, such provisions may be accompanied by an offer period of (for example) 10, 30, or 60 days.

Buy-sell and right-of-first-refusal provisions exist so that existing LLC members do not unwillingly find themselves in business with someone they do not know.

Non-Member Spouses

Are non-member spouses involved? Like real estate, personal property in Texas is presumed to be community property. A frequent error in transfers of LLC membership interest is failure to secure the signature of an assignor-seller’s non-member spouse. The result is that the entire interest may not have been conveyed, at least not in Texas. This is no different than if a grantee in a deed accepts the conveyance without requiring execution by the grantor’s spouse; since community property is presumed, the transfer may be incomplete if the spouse does not sign off, at least in a pro forma capacity.

To say that omitting the signature of a non-member spouse can drive subsequent disputes would be an understatement. Even though BOC Section 101.108 provides that a non-member spouse of an assignee may not assert control over the company, the potential for awkward and potentially disastrous disruption remains. Consider the case of a withdrawing member who is contemplating divorce but has not yet revealed this to other members who may want to buy his LLC membership interest. Will the assignment get tangled up in the parties’ divorce?

As is the case in transfers of real estate, it is common for sellers of an LLC membership interest to argue that the spouse should not be required to sign the assignment because the property transferred is a business asset rather than a part of the homestead. Real estate lawyers hear such excuses all the time. Other reasons may be given (“My wife is in China”). None of these excuses should be allowed to carry any weight unless the membership interest has been lawfully converted into separate property by a written partition agreement according to Section 4.102 et seq. of the Family Code.

What will be the accounting consequences? Is timing an issue?

There will likely be accounting consequences as a result of transferring an LLC membership interest. BOC Section 101.201 partially addresses this issue, stating “The profits and losses of a limited liability company shall be allocated to each member of the company on the basis of the agreed value of the contributions made by each member, as stated in the company’s records. . . .” This rule will apply unless the members collectively agree otherwise.

Attention should be given to the effective date of the assignment, since the transfer date may have more than one level of significance. It is advisable to select an effective date or record date for the assignment that facilitates easier calculation of profits and losses, or at least does not unduly complicate that calculation.

Will the membership interest pass a due-diligence inspection?

The issues referred to above are part of a larger group of due-diligence considerations that may concern a prospective buyer, which brings us to the due-diligence checklist in the next section.

DUE DILIGENCE BY THE ASSIGNEE-BUYER

Due diligence checklist.

The following is a partial list of items that should be of concern to a prospective assignee-buyer of an LLC Membership Interest:

(1) Valuation . Most small-business assignments of LLC membership interest occur among insiders who are already acquainted with the company’s assets, liabilities, management, and operations. For potential assignees who do not fall in this category, the question of valuation arises—not just valuation of the membership interest itself but valuation of the LLC as a whole, since the two are effectively inseparable.

Several articles could be written on how to evaluate and appraise a business; suffice it to say that there should be some rational basis for the asking price that can be independently confirmed by looking at the company’s finances and assets. Certain numbers will be hard (real property and bank accounts) and others will be soft (marketing strategy, proprietary information, and value of the brand).

If assets include real properties, an evaluation of value may include appraisals by licensed appraisers or the less-formal alternative of a broker price opinion (BPO). It is impressive if a real estate investment firm has an inventory of 30 rental properties; it is less so if half the properties are drowning in deferred maintenance. Numbers guys may be satisfied with financials and a spreadsheet; traditionalists will want to physically inspect the properties as part of the due-diligence process.

(2) Good Standing . It is important to verify that the LLC and the assignor (if a registered entity) are in good standing with the secretary of state and the comptroller. If not, they do not have the legal capacity to do business, which could potentially make execution of an LLC membership assignment invalid.

(3) Core LLC Documents . A prospective assignee-buyer will want to see core LLC documents including the certificate of formation; the certificate of filing (the secretary of state’s approval); the minutes of the first organizational meeting of members along with subsequent minutes of special meetings (if any) and annual meetings; company resolutions or grants of authority; the company agreement, as currently amended or restated; and any membership certificates that may have been issued (or at least a record of same).

Also: where are the official LLC records kept? Who is responsible for keeping them, and is access readily available? Is there a company book, i.e., a binder containing these? Failure of an LLC to keep organized and complete records is a warning sign for a potential assignee. This is true regardless of and aside from any statutory requirements for LLC record keeping.

A vital object of an assignee’s investigation should be the company agreement. The company agreement is essentially a partnership agreement among LLC members, so it will directly bind a prospective assignee . Is it valid? Is it a legal document of substance or is it a three-page printout from the internet that is not even relevant to Texas? Are provisions of the company agreement compatible with the intentions and goals of the assignee? What limitations does the company agreement impose (for example, restrictions on transfer of membership interests)? Can one easily re-sell the membership interest or are there hoops to jump through?

(4) Managers . It is operationally important to determine if the LLC is member-managed or manager-managed and, if the latter, to identity of the managers. Can the assignee work with these persons? Are they professional and competent? What is their track record?

(5) Member List . LLCs are required to keep current lists of members, their respective interests in the company, and a list of all contributions to the company. BOC Sections 101.501(a)(1)-(7). Fellow members of a smaller LLC are effectively your partners in the enterprise. It is good to know to know something about them.

(6) Contracts and Agreements with Third Parties . Any agreements with third parties that affect control, management, or operation of the LLC should be examined. Examples would be contracts with vendors or a property management agreement with a third-party management company. Is the LLC currently part of a joint venture with a different group of investors?

(7) Voting Agreements . These may or may not exist. Any one or more of the members may enter into voting agreements (including but not limited to proxies and pledges) that can affect control of the entity.

(8) Federal Tax Returns. Tax returns are important to verify how the LLC is taxed and how ownership is reported to the IRS. Tax returns and LLC records should be consistent in this respect. It is a good idea for a prospective assignee to have a CPA review the company’s tax returns.

(9) Texas Annual Filings . A prospective assignee should review the franchise tax returns and public information reports (PIRs) that must be annually filed with the comptroller’s office. Do these accurately reflect the LLC’s affairs? Are they diligently prepared and timely filed?

(10) Transactional Records . What property does the LLC own? Are warranty deeds in the name of the LLC duly recorded in the real property records? How are properties managed and who is responsible for doing so? What do the files and records look like—are they orderly or are they a mess? And what about completeness? Do files for rental properties contain all essential documents like warranty deeds, notes and loan agreements, deeds of trust, leases, appraisals, maintenance records, and so on? A specific person should be responsible for keeping such records at a designated location.

(11) Salaries, Draws, and Distributions. These should be examined to discover if there is a pattern of excessive or erratic compensation to managers or distributions to members. Is there a coherent schedule or plan? Are measures in place to insure that the LLC maintains sufficient working capital to fund existing and planned operations?

(12) Bank and Depository Accounts . Current and recent copies of account statements should be examined. Look for any unusual withdrawals or capital flows. Is the LLC adequately capitalized? Does it have an adequate capital reserve? Inadequate capitalization is the number one cause of small business failure.

(13) Records of Pending, Prospective, and Resolved Legal Actions . Is the LLC being sued? Has it been sued in the past? Do the managers have a history of shoddy or deceptive dealings? Is the LLC continually receiving DTPA notice letters from attorneys? Default letters from HOAs or appraisal districts? Does the company charter get periodically revoked (and then have to be reinstated) because the LLC fails to timely file its franchise tax return or PIR? Consider meeting with the LLC’s attorney and CPA. Require that confidentiality be waived in order to get a frank assessment of the situation.

(14) Best Practices Generally . It is important to ascertain whether or not the LLC is run with diligence, integrity, and in compliance with applicable law. What is the company culture with regard to best practices? Does the LLC have a regular business attorney and CPA to advise the managers? Or do the managers wing it on a DIY basis most of the time, counting on a surging market to cover their mistakes?

(15) Reputational Evidence . A prospective assignee may want to do some digging in order to evaluate the business and personal reputations of the managers and members. What is their professional history? The personal lives of the existing members may also be relevant: are any of them getting a divorce from a spouse who might turn into a hostile party? Was one of them just expelled from the country club for non-payment of dues? An internet search is, of course, the bare minimum but it may also be prudent to consider a private investigator (These are not just for the movies).

(16) Company Performance . How have the LLC’s investments fared, particularly over the last three years? What do the company accounts show and are these numbers verifiable? Does the spreadsheet match up with the checkbook?

Trends are an important part of value analysis. Try to reduce the LLC’s quarterly and annual results to line graphs for income and costs. Which way are these factors trending?

(17) Business Plan . Do the managers and members have specific goals or is their strategy more built around finding targets of investment opportunity? Is their plan realistic or pie-in-the-sky? What will the company likely look like in three years? Five years? Is a change in direction required?

The importance of thorough due diligence conducted during an adequate inspection period cannot be understated. Knowledge, as they say, is power. If one must sign a confidentiality or non-disclosure agreement in order to get relevant information on the LLC and its members, then that is what should be done.

CLAUSES AND PROVISIONS OF THE ASSIGNMENT

Assignments of interest generally.

All assignments of interest (regardless of the interest assigned) include—or should include—certain common clauses and provisions. After identifying the parties and the exact interest to be assigned, the document should state the consideration being paid; whether the consideration is nominal, cash, or a financed amount (secured or unsecured); recite both transfer and acceptance language; state whether the assignment is made entirely “as is” or instead with representations and warranties; state whether the assignee will have any recourse in the event certain post-assignment conditions are not met and identify the recourse mechanism; recite covenants and agreements of both parties that will result in the implementation of the transfer along with remedies for default if these measures are not carried out; a mutual indemnity clause; any special provisions agreed to by the parties; an alternative dispute resolution (mandatory mediation) clause; and conclude with various miscellaneous provisions that identify applicable law and venue, advise all parties to consult an attorney, set an effective date, and so forth.

A “Consent of Non-Member Spouses” should be appended if applicable. Exhibits to the assignment (pertaining to company assets and liabilities, for instance) may also be needed.

Representations and Warranties

An assignment may include a full set of representations and warranties (“reps and warranties”), limited reps and warranties, or no reps and warranties at all—in which case the assignment is made entirely as is and (in such cases) is almost always without recourse, meaning there is no defined remedy against the assignor-seller if the LLC membership goes sour for some reason. Representations and warranties may be made by assignor, assignee, both, or neither.

Core reps and warranties are basic assurances to which no reasonable party should object. Reps and warranties can get much more detailed and extensive from there. If attorneys are involved, the reps and warranties section of a contract may be heavily negotiated.

The assignor-seller’s goal is to minimize post-closing liability by transferring the membership interest “as is” to the maximum extent by including only a minimum number of reps and warranties. It should be noted that inclusion of the above-mentioned core items does not impair the ability of an assignor to assign an interest “as is.” For this reason, it is always somewhat suspicious when an assignor refuses to give any reps or warranties at all.

The assignee-buyer instead prefers a longer and more specific list of reps and warranties on the part of the assignor-seller. One of the goals of the assignee in the due diligence process is to ascertain, to the greatest extent practicable, the accuracy of reps and warranties that have been or will be made by the seller.

Examples of Reps and Warranties

Examples of basic reps and warranties would include assurances that each party, if a registered entity, is in good standing; the party has power and authority to enter into the transaction without joinder of others; and there exists no condition or circumstance that would render the transaction illegal or invalid or place the party in breach of an existing contract. Additional near-core items would include assurances that each party has performed adequate due diligence and has consulted an attorney before signing.

Both assignor and assignee should also want to include a statement that neither party is making or relying upon any reps or warranties that are not expressly set forth in the assignment. The goal is to prevent anyone from assuming anything or alleging that certain assurances were oral or implied.

Reps and Warranties: Duration and Default

Once reps and warranties are negotiated, it must be determined how long they will survive closing—if at all. 30 days? 90 days? Indefinitely?

A final issue in this area has to do with remedies for default in the event of breach. Attorneys frequently include a clause requiring that such default be a material (rather than a trivial) breach in order to be legally actionable. The issue is then raised, how does one define material ? One method is to impose a monetary floor, e.g., by confining assignor liability to issues that result in a loss or cost of (say) $10,000 or more.

Assignments Made “As Is”

As noted, an assignor-seller can include basic (limited) representations and warranties and still convey an LLC membership interest “as is.” Many business persons, including lawyers, do not adequately understand this. For example, stating that one has sufficient power and authority to enter into a transaction does not suggest any representation or warranty as to the item being conveyed. It is a core representation that should probably be included in every assignment.

The key to protecting the assignor is a thorough “as is” clause. Just as is true with real estate conveyances, the more thorough and extensive the “as is” clause, the better. One-liners will generally not do. This is particularly true if there have been oral or email negotiations over a period of weeks or months. The goal should be not only to convey the interest “as is” but also to entirely exclude any statement that cannot be expressly found in writing within the four corners of the assignment instrument.

Covenants and Agreements of the Parties

Covenants and agreements address the legal obligations of the parties going forward—specifically what actions they are required to take in order to implement the assignment. Covenants and agreements of the assignor-seller would include, for example, an obligation to promptly endorse and deliver to the assignee-buyer any certificates evidencing the membership interest in question.

The assignee-buyer should also covenant and agree to abide by the company agreement and other governing documents. Since Texas is a community property state, the spouse of a new assignee should also be asked to sign off on this commitment. The best practice is to secure the signatures of both the new assignee and any non-member spouse not only on the assignment but on the company agreement itself.

Additional covenants and agreements of the parties may be (and usually are) included. This is another area that is subject to extensive negotiation and customization to the circumstances.

Recourse by Assignee upon Occurrence of Specified Conditions

The option for some form of limited or conditional recourse may be included in any assignment of interest. In the case of an LLC membership interest, the assignment could provide that, upon occurrence of certain conditions, the assignee would have the right to re-convey the membership interest and receive return of all or part of the consideration. Examples of such conditions would be any adverse event—a negative outcome in a pending lawsuit or zoning proceeding; condemnation of certain LLC property; failure of a pending joint venture; or the discovery that any representations or warranties of assignor were materially false or deceptive when made. The availability of a recourse mechanism is generally time-limited, say for 90 days after closing. Some assignments might also refer to this recourse mechanism as a right to rescind.

In any assignment instrument, the alternative to full or limited recourse is no recourse at all by the assignee-buyer. For example, real estate notes are often sold without (either full or limited) recourse against the assignor-seller in the event that the borrower on the note defaults. In such a case, absent any provision for recourse, the assignee-buyer of the note would then be in possession of a non-performing asset. The remedy is not against the assignor, but to pursue the debtor directly.

Mutual Indemnity

Ideally, and unless there are special circumstances, the assignor and assignee should release and indemnify one another for LLC-related actions, claims, liabilities, and obligations occurring before and after (respectively) the effective date of the assignment. Indemnity provisions are useful and worthwhile, but one needs to clearly understand their limitations. They are not a covenant not to sue.

Non-Compete and Non-Disclosure Provisions

Sale by a departing LLC member to another member may raise concerns that the departing member will utilize proprietary and confidential information in order to compete with the company in the same line of business within the same geographical area. Agreements regarding intellectual property and non-competition are typically stand-alone full-length contracts; nevertheless, it is possible to include compact and enforceable IP and non-compete provisions that fit smoothly and purposefully into a sale and assignment of LLC membership interest. Failing to do this can be an error with serious consequences.

Corporate Transparency Act and FinCEN Reporting

The Financial Crimes Enforcement Network (FinCEN), an arm of the Treasury Department, is charged with rulemaking to enforce the Corporate Transparency Act which was passed in 2021. The CTA contains sweeping requirements regarding the reporting of beneficial interests in LLCs and corporations.

To the extent that a sale and assignment of LLC membership interest constitutes a change in beneficial ownership, then a report to FinCEN will likely be required. The assignment instrument should expressly address the applicability of the CTA and designate which party (usually the assignee) will be responsible for filing a supplemental FinCEN report.

If the burden of FinCEN reporting falls on the assignee, then the assignor may want to include an indemnity clause for added protection. The assignor may also want to limit liability for past FinCEN reporting.

Alternative Dispute Resolution: Mandatory Mediation

Since we live in a litigation nation, it is highly advisable to include a provision that requires mediation prior to commencing legal action. Approximately 80% of mediations result in a settlement. In other words, mediation works, at least most of the time.

A mediation clause should require the conflicting parties to first confer in good faith and attempt to resolve the dispute in a way that accommodates the legitimate interests of both sides. If agreement is reached, it should be reduced to a signed writing and implemented. If not, the parties should then agree to formally mediate the dispute before a certified mediator prior to resorting to litigation or filing any complaint with a governmental or administrative agency.

A mandatory mediation provision should also state where the mediation will be held (which city or county) and for how long (mediations are usually either a half-day or a full day). Each party should commit to bearing its own fees and costs until the mediation is concluded.

Special Provisions and Stipulations

It is useful to include a catch-all special provisions section that allows room for terms that may be specific to the subject transaction and its unique circumstances. These special agreements and provisions frequently arise and this is the place to insert them.

Stipulations are a slightly different concept. For example, an assignment of LLC membership interest may involve a new list of members. It may also require a re-allocation of percentage interests among the remaining members. So it may be beneficial to include a stipulation that after conclusion of the assignment, the new membership list (with accompanying revised percentage interests) will be as described in Exhibit A. This usefully erases any doubt as to the overall final outcome of the transaction.

As previously noted, a special meeting of members is an important companion document to the assignment of LLC membership interest. The meeting, signed by all affected parties, can not only approve the assignment but mention issues such as record date, a general ratification of the assignment and the new member list, and also authorize issuance of new membership certificates.

No Reliance and No Representation Clauses

The assignor-seller (in particular) may want to make it clear that the assignment is made and accepted by the assignee-buyer only after a proper due-diligence investigation and without reliance on any statements or assurances (especially oral ones) made by the assignor-seller or its agents.

Wrap-Up Provision Relating to Execution and Delivery of Documents and Records

It would be an oversight if an assignment of LLC membership interest failed to mention possession and delivery of company books and records, an omission that has resulted in more than a few lawsuits. An agreement to execute and deliver such additional and further documents as may be reasonably necessary to effectuate the purposes of the assignment should cover and include any affected LLC records, including the company book and accounting records. These may need to be transferred to a new assignee-owner or returned to the assignor-seller after due-diligence inspection.

Clients often do not understand why a sale and assignment of LLC membership interest cannot be a simple, one-page document. It is hoped that this article will clarify the answer to that question.

Information in this article is provided for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. No attorney-client relationship is created by the offering of this article. This firm does not represent you unless and until it is expressly retained in writing to do so. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well.

Copyright © 2024 by David J. Willis. All rights reserved. Mr. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. More information is available at his website, www.LoneStarLandLaw.com .

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Home » LLC Interest Transfer » Assignment and Transfer of Membership Interest

Assignment and Transfer of Membership Interest

Jeramie Fortenberry, J.D., LL.M.

An LLC owner (called a member ) can transfer an ownership interest (called a membership interest ) by complying with the transfer provisions within the LLC’s operating agreement and state law. An assignment is one of the key documents a member must prepare to officially transfer a membership interest to a transferee.

What is the Purpose of an LLC Interest Assignment?

An assignment—sometimes titled assignment and transfer or assignment and assumption —serves as a written record of a member’s transfer of an LLC interest to a transferee. It is comparable to a deed that transfers real estate, but an assignment instead transfers to a new owner (the assignee or transferee ) some or all of an LLC member’s ownership rights in the company. Like some deeds, an assignment may include the member’s guarantee that he or she actually owns the interest being transferred and has the right to transfer it.

An LLC interest assignment must comply with any transfer terms, conditions, or restrictions in the company’s operating agreement. For example, an operating agreement may require other members’ consent to the transfer or limit the ownership rights that members are allowed to transfer.

An LLC owner may also prepare an assignment when offering an ownership interest as security for a loan. In that situation, the lender is the assignee and usually claims the interest only if the member fails to repay the loan. Assignments of LLC interests pledged as collateral are subject to additional laws and are not the focus of this article.

What LLC Interests Do Assignments Transfer?

A member who creates an LLC assignment customizes the assignment to the precise ownership interest the member wishes to transfer. LLC ownership interests can generally be separated into two basic interests:

• Economic rights. A member’s economic rights (sometimes called transferable interest ) include the member’s allocation of the LLC’s profits and losses and the member’s right to receive distributions from the company.
• Membership rights. A member’s membership rights—which are typically defined in the operating agreement—include the member’s right to vote on important matters, participate in the LLC’s internal affairs, and join in the management of the company (if it is member-managed).

An assignment can transfer the member’s economic rights (in whole or in part)—in which case the transferee receives a right to LLC distributions but no right to vote on LLC matters. Or, an assignment can transfer the member’s entire interest in the company. A transfer of all membership rights typically requires other members’ approval, formal admittance of the transferee as a new member, and a separate joinder agreement under which the new member accepts the LLC’s operating agreement.

What Information is Included in an LLC Membership Assignment?

An assignment must identify the transferor and the transferee, the company, and the specific interest being transferred. It should state whether the transfer applies to all or part of the transferor’s interest and whether the transferee will receive all membership rights or an economic interest only.

Assignments often also include:

• A reference to the operating agreement’s authorization of the transfer;
• A statement that the transfer has been approved under the operating agreement’s approval standard; and
• The transferor’s warranty that he or she actually owns the interest and that the assignment does not breach any other agreements.

An assignment must be signed by the member who makes the transfer and—depending on its terms—may also be signed by the transferee and on behalf of the LLC.

Assignment of Membership Interest (M&A Transaction) | Practical Law

Assignment of Membership Interest (M&A Transaction)

Practical law standard document w-036-7473  (approx. 10 pages).

Assignment of Membership Interest (M&A Transaction)

This template is an assignment of membership interest used to transfer all of a seller's membership interest in a limited liability company (LLC) to a buyer as part of an M&A transaction. This template includes practical guidance, drafting notes, and alternate and optional clauses. An assignment of membership interest is a common closing deliverable in M&A transactions involving the sale of all of the membership interests of an LLC. As an assignment made in connection with an M&A transaction, this template does not include standalone representations and warranties, conditions to closing, indemnification provisions, or other terms ordinarily contained in a membership interest purchase agreement. For template purchase agreements containing these provisions, see Membership Interest Purchase Agreement (Long Form) (Pro-Buyer) (DE) and Membership Interest Purchase Agreement (Long Form) (Pro-Seller) (DE). This is a non-jurisdictional template, and the default provisions of this template assume that the membership interest being assigned is uncertificated. This template also assumes that the buyer in the underlying M&A transaction is acquiring all of the issued and outstanding membership interests in the target LLC, either from the seller alone or from multiple sellers. If you use this template in a transaction where the buyer is acquiring less than all of the issued and outstanding membership interests in an LLC, you must review the LLC's operating agreement to confirm whether there are any notice and consent requirements, restrictions on the sale and transfer of the LLC's membership interests, rights of first refusal, or tag-along rights in favor of other members that must be addressed prior to closing the acquisition. For an overview and discussion of common membership interest transfer restrictions, see Key Provisions in Joint Venture Agreements — Restricting Transfers of Interests. For additional information and resources on ancillary agreements in M&A transactions, see Ancillary Agreements in M&A Transactions Resource Kit. For template membership interest purchase agreements, see Membership Interest Purchase Agreement (Long Form) (Pro-Buyer) (DE) and Membership Interest Purchase Agreement (Long Form) (Pro-Seller) (DE). For a template assignment agreement used to transfer an interest in a limited partnership (LP), see Assignment of Limited Partnership Interest.

LLC Membership Interest Assignment

Choose the state where the LLC is formed (and primarily does business). This will be the state where all of the initial business documents for the LLC, like the Articles of Organization or Certificate of Formation, have been filed.

State of Alabama

I. This assignment ("Assignment") is made by and between the following parties: ________ , hereinafter known as "Assignor," having an address at the following:

and ________ , hereinafter known as "Assignee," having an address at the following:

II. Assignor, an individual, hereby assigns, transfers, and conveys all of Assignor's right, title and interest in and to all of Assignor's membership interests in ________ , a Alabama Limited Liability Company, hereinafter known as the "LLC," to Assignee, an individual. Such membership interest amounts to the following percentage ownership: ________ % (________ percent) membership interest, along with voting rights in the LLC, and this Assignment shall leave Assignor with no interest in the LLC. Assignee hereby accepts this Assignment.

III. This assignment is effective as of ________ and is made for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged.

IV. Assignor hereby represents and warrants and that Assignor has good title to the membership interest conveyed herein and that Assignor has no limitations on making such assignment, such as any security interest, lien, or encumbrance.

V. 88882225 2552525 5225282228 525 85555228 2552 82 8888 2522 522 82228 22 2252282 88882222'8 5282822 22 252 2228258582 82225282 82 252 228 58 52858525.

VI. 5588 5888222222 85588 82 85885 525 8825822 5222 588 22 88882225 525 88882222'8 8588288258, 25528225228, 52858, 525 5888228.

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be executed on the following date: ________ .

Assignor: ________

Signature: __________________________

Assignee: ________

Consent To Assignment Of Membership Interest

Each and all of the members of ________ , a Alabama Limited Liability Company, hereby consent to the assignment, transfer and conveyance of membership interest in ________ made by the attached LLC Membership Interest Assignment. Each and all of the members further agree that Assignee is now a member of ________ and Assignor retains no further interest in ________ .

Assignee shall have all the rights and powers of a member henceforth.

This consent is made on the following date: ____________________.

Name of Member: __________________________

Signature:__________________________

HOW TO CUSTOMIZE THE TEMPLATE

Answer the question, then click on "Next."

The document is written according to your responses - clauses are added or removed, paragraphs are customised, words are changed, etc.

At the end, you will immediately receive the document in Word and PDF formats. You can then open the Word document to modify it and reuse it however you wish.

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Assignment of Limited Liability Company Interest

By Joe Stone, J.D.

• Do All Members of an LLC Have to Sign the Purchase Contract?

As a limited liability company member, you usually have the right to assign your membership interest in the LLC to a nonmember, subject to the requirements of state LLC law. Typically, the assignment provides the nonmember with the right to receive your share of any LLC profits but does not give the nonmember any of your management rights. The remaining LLC members usually decide whether the nonmember is admitted as a member with management rights.

Assignments

An assignment involving your LLC membership occurs whenever there is a transfer of your property rights in the membership. The transfer of rights can occur voluntarily such as in a sale of your membership to cash out of the LLC. Another type of voluntary transfer involves using your membership to satisfy your personal debts in lieu of bankruptcy, generally referred to as an assignment for the benefit of creditors. A transfer of your membership to your legal heirs or designated beneficiaries occurs by operation of law upon your death. In each situation, the assignment results in a complete transfer of your property rights in your LLC membership.

LLC Membership Interest

An LLC is commonly considered a cross between a corporation and partnership. LLC members enjoy personal liability protection, as do a corporation's shareholders, and the ability to structure the LLC management to suit their own needs, as in a partnership. An LLC is also like a partnership in that the profits and losses of the LLC are passed through to each member just as in a partnership. As a result, your LLC membership consists of two parts: an economic interest -- the right to share in the profits and losses of the LLC; and a control interest -- the right to vote on and manage the affairs of the LLC.

Membership Transfer Rules

If a member assigns his LLC membership to a nonmember without the consent of the other members, state law typically limits the assignment to only economic rights, not control rights. For example, Arizona Revised Statute 29-732 states that “the assignment of an interest in a limited liability company does not…entitle the assignee to participate in the management of the business and affairs of the limited liability company or to become or to exercise the rights of a member.” The Revised Uniform Limited Liability Act, which has been adopted in nine states as of June 2013, contains a similar provision that states, "the transferor retains the rights of a member other than the interest in distributions transferred and retains all duties and obligations of a member." To acquire control rights, the LLC members must consent to extend full membership to the nonmember.

Other Considerations

LLC members usually create an operating agreement to govern their rights and duties to the LLC and each other. Unless specifically prohibited by state law, the members can agree to provisions in the operating agreement that alter the default rules that apply under state law. In anticipation of future assignments, the members can include in an operating agreement the rules for whether control rights can be assigned with economic rights and under what conditions.

• FindLaw: Legal Dictionary -- Assignment
• Texas Secretary of State: Selecting A Business Structure
• The Free Dictionary: Limited Liability Company
• Arizona Legislature: Arizona Revised Statute 29-732
• National Conference of Commissioners on Uniform State Laws: Revised Uniform Limited Liability Act
• National Conference of Commissioners on Uniform State Laws: Enactment Status Map -- RULLCA
• SBA.gov: Operating Agreements; The Basics

Joe Stone is a freelance writer in California who has been writing professionally since 2005. His articles have been published on LIVESTRONG.COM, SFgate.com and Chron.com. He also has experience in background investigations and spent almost two decades in legal practice. Stone received his law degree from Southwestern University School of Law and a Bachelor of Arts in philosophy from California State University, Los Angeles.

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Assignment of Membership Interest Agreement

This is a sample assignment of LLC membership interest agreement where the assignor - a company that is the sole member of a Limited Liability Company (LLC) - assigns to the Assignee an undivided one-third membership interest in the LLC.

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Assignment and Assumption of Membership Interests

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Why the progressive 'Squad' is getting smaller after defeats this primary cycle

The “Squad,” a group of progressive lawmakers in the House, is set to shrink next year after two members suffered primary defeats after an unprecedented deluge of special interest spending

WASHINGTON -- The "Squad,” a group of progressive lawmakers in the House, is set to shrink next year after two members suffered primary defeats this election cycle following an unprecedented deluge of special interest spending.

The primary losses for Reps. Cori Bush in Missouri and Jamaal Bowman in New York came over the summer and dealt a blow to the progressive faction, which had amassed considerable clout within the Democratic Party since its initial rise in 2018.

The cohort of Black and brown lawmakers — including Reps. Rashida Tlaib of Michigan, Alexandria Ocasio Cortez of New York and Summer Lee of Pennsylvania — became the target of pro-Israel PACs like the American Israel Public Affairs Committee, or AIPAC , late last year after members criticized Israel's response to the Oct. 7 attack by Hamas. Eight months later, AIPAC's super political action committee, United Democracy Project, helped unseat Bush and Bowman after pouring nearly $25 million combined into those races.

Still, there were other factors that contributed to the defeat of Bush and Bowman beyond their position Israel, raising questions as to what extent voters rejected their progressive politics.

Another member of the Squad, Rep. Ilhan Omar of Minnesota, easily won her primary Tuesday against a repeat challenger despite voting similarly to Bush and Bowman over the last two years and being a vocal critic of Israel.

Here's how the three Democratic primary races played out:

Bowman was particularly vulnerable this election cycle because of redistricting.

The new map of his the district eliminated most sections of the Bronx and added more of Westchester County’s suburbs, greatly narrowing the number of Black voters who were key to Bowman’s reelection effort.

Then Bowman drew a strong challenger in well-known county executive George Latimer, a centrist with more than three decades of political experience in the Westchester area.

Latimer entered the race with the support of Jewish leaders in the district who were upset with Bowman’s critical stance on Israel. He also enjoyed hefty financial backing from AIPAC’s super PAC, which poured about $15 million in the race to support him.

The contest was largely shaped by Bowman’s position on Israel. Latimer hammered the incumbent as more focused on Israel than the needs of the district. Latimer also flexed his deep regional knowledge to make the case to voters that he could would be a more effective member of Congress.

Bowman, who was seeking a third term, also had to fend off persistent criticism over triggering a fire alarm in a House building while lawmakers were working on a funding bill. He said it was unintentional, but the incident drew waves of embarrassing coverage and he was censured by the House for his actions.

The focus of campaign ads against Bush in the final weeks before her August primary against St. Louis County Prosecuting Attorney Wesley Bell was not her scathing criticism of Israel or its leader, Benjamin Netanyahu, but instead a vote that she and five of her Squad colleagues took in late 2021.

United Democracy Project, which spent more than $8.4 million against Bush, began airing ads in the local media market that highlighted the 48-year-old's vote against a bipartisan infrastructure bill signed into law by President Joe Biden and supported by the majority of the Democrats in Congress.

“This infrastructure bill that Joe Biden passed has been so good for working people in St. Louis,” one voter said during the 30-second ad. “Cori Bush voted against it.” Another added, “She voted against our jobs.”

Bush, Bowman, Omar and other progressives defended their vote against the bill at the time, saying it was a necessary stance as they fought for passage of a separate social and environmental package. But their vote on the bill only became a campaign issue for Bush.

Allies of Bush say the campaign to defeat her wouldn't have been possible had Bell not had the support of outside groups like UDP, which spent more than $400,000 to air the half-minute spot, according to data from the media tracking firm AdImpact.

“If you asked any any voter in any of these districts at the start of this cycle, ‘Do you know how your member of Congress voted on the infrastructure bill?’ no one would say yes,” Usamah Andrabi, a spokesman for the progressive Justice Democrats, told The Associated Press. “No one was thinking about a vote that happened three years ago for a bill that passed.”

Beyond her legislative record, Bush faced a series of public and personal scandals of her own in the last few years, including an ongoing Justice Department investigation into her campaign spending.

Omar managed to avoid the fate of her two fellow Squad members and had several things going in her favor. First, the African-born congresswoman, who has broken many firsts since being elected to the House in 2018, had the advantage during her primary Tuesday of having previously defeated her challenger.

In 2022, former Minneapolis city councilman Don Samuels came just two percentage points short of beating Omar with the help of UDP, which spent six figures in the race. This time around, the third-term lawmaker took the threat posed by Samuels and a potential influx of AIPAC money much more seriously.

“I think the congresswoman and her team understood that there needed to be a lot of work to remind people in that district about what type of leadership she brought,” Andrabi said. “And I think she exemplified that.”

Omar also raised a lot more money for the primary, with her campaign reporting that it raised around $6.2 million. Samuels, on the other hand, raised about $1.4 million.

“What I was hoping is that a strong ground game and an attention to the details of folks who felt left out would trump an overwhelming superiority in dollars,” Samuels said in a recent AP interview. “Clearly money matters a little more in politics than I had hoped.”

Omar's substantial fundraising advantage, coupled with the endorsements of Minnesota’s Democratic Party and progressive leaders like Sen. Bernie Sanders of Vermont, helped her win by nearly 14 points.

And possibly the most important factor in her race was that groups like AIPAC ultimately didn't get involved despite threatening to unseat any candidate they deemed insufficiently pro-Israel.

___ Izaguirre reported from New York. Associated Press writers Jim Salter in St. Louis and Steve Karnowski in Minneapolis contributed to this report.

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Atlanta Fed’s Bostic calls on patience amid the clamor for interest rate cuts

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Could the Federal Reserve’s campaign to tamp down on inflation be nearing its end? On Thursday, the July consumer price index showed inflation falling to 2.9% year over year , the first time it had fallen below 3% since 2021. And while that still leaves it above the Fed’s 2% target, the trajectory could clear the way for Fed officials to cut rates when they next meet in September.

Raphael Bostic, president and CEO of the Federal Reserve Bank of Atlanta, is one of the officials who will vote on whether or not to cut rates, which have held at a 23-year high since July 2023. Bostic spoke with “Marketplace” host Kai Ryssdal about his outlook on the economy and where he thinks monetary policy might be headed.

Kai Ryssdal: So you get the CPI the other day. You get it a day early, right?

Raphael Bostic: I do not.

Ryssdal: Really?

Bostic: I get it with everybody else.

Ryssdal: All right, so, you get it yesterday morning, and you see 2.9%, and what’s the first thing you think?

Bostic: The first thing I think is inflation is getting back to target in an orderly way. And I have, geez, a lot more confidence that inflation’s sustainably on its way to 2%, which is a very good thing. The top-line numbers have been falling consistently. [Personal consumption expenditures price index] before the CPI had fallen nicely, and the CPI numbers the first time since March of 2021, that had been below 3% , so lots of progress, and that’s very positive.

Ryssdal: All right, so look, you said a couple of magic words in there. It’s proceeding orderly toward 2%, you have “more confidence.” The next question has to be: What’s taking you guys so long?

Bostic: Well, I think you have to remember our target’s 2%, not 2.9 or 3.2. There’s still a ways to go, and things can happen on that road. So, I think it’s in all of our interests to be cautious and vigilant to make sure that the next reading doesn’t take us in a different direction. So patience, I’ve been talking about patience for a long time. I think I’ve been on your show about a year ago, was saying that we’re going to have to wait this out and just be patient, because if we rush, go too soon and then have to raise rates again, that will be, you know, my directors and my board members tell me that’s the nightmare scenario. So I want to make sure that we avoid that.

Ryssdal: Understood. But a year ago, unemployment was, I don’t have the number right in front of me, but certainly less than 4%. Now it’s ticking up. It’s 4.3%, and the labor market is starting to look a little meh. How much does that change your calculation?

Bostic: Well, it’s definitely a factor. You know, when I talk about the labor market, the phrase I use is “weakening, but not weak.” By historical standards, the unemployment rate of even the 4.3% is pretty low. Now what you said is true. It’s come off of a 3.4% level, so that’s a lot of weakening. But when I talk to businesses, and what they tell me is, although they’re not looking to hire a lot of workers, they’re actually not in layoff mode either. Their outlooks or that demand is going to stay strong, and that the workforce they have today is going to be one that will sustain. So it’s still tight out there. I mean, I try to remind people, right before the pandemic happened, everyone was saying labor markets are tight, and how can we continue to have a strong economy if we can’t find workers? We’re kind of in that space again.

Ryssdal: Is it fair for those of us who keep a close eye on the Fed to intuit that you all are starting to, I mean, it’s not that you haven’t been paying attention to the labor market, but inflation has been taking up virtually all of your brain space. Do you now have more brain space for the labor market as it weakens, but is not weak, as you say.

Bostic: I definitely do. You know, the thing that I’m most concerned about at this point is that we have dual mandate, and both of them need to get to their target. Inflation is moving in the right direction. Employment might be moving in the wrong direction. And so the thing I’m most concerned about is that this weakening that we’ve seen accelerates in such a way that jobs stop being produced, and then that might lead to more disruption and pain in the labor force. What I would say right now, though, is I’m pretty pleased that that’s not what we’re seeing now, and that’s the important thing. Consumers, by and large, are continuing to spend. And so the demand for product is good, and firms and businesses feel like they got to keep their workers, because they’ve got some demand to meet.

Ryssdal: You know, we had you on in the earlier days of the pandemic, when “transitory” was the was the word of the day. And you very famously, as you said on this program and elsewhere, you’d had a little swear jar at the Atlanta Fed, every time somebody said “transitory,” they had to put a buck, or whatever it was, in the swear jar. And we’re past that discussion. Here’s my question, though, the consuming public sees inflation coming down at a very nice clip, much closer to where the Fed wants it to be. The catch, of course, is that price levels remain elevated. How do you make people understand that even though inflation is down, price levels are likely to remain high?

Bostic: Well, I say it just the way you said. Price levels are not likely to come back down. But the most important thing in all of this is that wages are growing faster than inflation, so families’ pricing power, purchasing power is increasing with every month, and over time, the prices won’t feel like so much of a sticker shock relative to the amount of money people will have in their pocketbooks. So that’s the part that I think is really important. It’s just going to take some time for that wage dynamic to play out, and once that does, I think people will start to, like, level into a new equilibrium.

Ryssdal: I’m going to commit the journalistic sin here of asking you a question that I know you’re going to dodge, but I kind of have to anyway. The Fed is going to become more political as the election season goes on, and I know you will say, as Fed Chair Powell has said, as all of you all say, we don’t let it interfere with our decision-making. Here’s my question: When you’re in the room, and we’ll say that you’re a voting member of the Federal Open Market Committee this year, do you all talk about not talking about the politics of this whole thing? 

Bostic: I don’t, because I’m not going to talk about it. So, there isn’t a reminder that needs to be made. No, it’s really interesting. If you look back over the history of the Fed, even in the last 20 years, the Fed has done actions in election years … close to the election date itself. And so for me, I think that’s a reminder to me that we have a history of doing the right thing at the right time, or the thing that we think is right at the right time, and I’ve got an obligation to abide by that and to continue that tradition moving forward.

Ryssdal: Last thing, sir, and then I’ll let you go. September, live meeting or not a live meeting?

Bostic: Every meeting is a live meeting. I’m hopeful that the numbers are going to come in quite positive, and we’ll have an interesting conversation about whether we should be moving off of our policy stance. And then we’ll just see sort of where that goes.

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Assignment of Interest: Everything You Need to Know

Assignment of interest takes place when a company is formed and the members or owners decide on the ownership percentages they will each hold. 3 min read

Assignment of interest takes place when a company is formed and the members or owners decide on the ownership percentages they will each hold. It also occurs when a member decides to leave the company and transfer their interest to another.

What Is an LLC?

An LLC, or limited liability company, is a business structure that offers liability protection to its members. The members of an LLC are essentially its owners, like the shareholders in a corporation. In the event of any financial or legal issues with the business, the members are protected from creditors taking any of their personal assets.

The interest percentages allotted to the LLC members are usually proportional to their capital contributions or their managerial responsibilities. This is also called their membership interest. LLC members who hold interest in the business are entitled to profit distribution as well as voting rights over company matters.

When members of an LLC retire or leave the business, they can assign their interest to another existing member or a new member. The LLC's operating agreement should outline how such a transfer should be handled. If there are no provisions for assignment of interest in the operating agreement, the state in which the LLC conducts business should have rules and regulations to follow instead.

LLC members tend to have more control over the daily operations of the business when compared to corporate shareholders. Usually, the members of an LLC are actually the individuals who started the business, so they have a strong desire to see the company succeed.

How Assigning Interest Works

LLC members assign interest when they need to hand their rights and responsibilities to the company over to another individual or business entity. One member's interest can be transferred to another in full or in part.

For instance, a retiring LLC member's interest in the business including all of the following aspects:

• Voting rights
• Managerial duties
• Profit sharing

That member might choose to give their managerial duties to one person and their voting rights and profit shares to another. Basically, members reserve the right to assign their interest in any way they see fit, as far as the operating agreement allows.

Once the new member receives the interest, they inherit all of the rights and responsibilities that come with LLC membership that particular business, unless the operating agreement states otherwise.

Sometimes membership interest can be transferred, but the original member can hold onto their voting rights in the business, while the new member takes over the other rights and duties.

What Is an Assignment of Interest Agreement?

Assignment of interest agreements are the documentation for any transfer of interest in an LLC. In the contract, you should find the following information:

• Name of original interest holder
• Type of interest being transferred
• Name of the individual or entity to receive the interest
• Name of the LLC
• Percentage of interest being assigned
• Date of assignment
• Other applicable terms and conditions

Once the assignment of interest agreement is signed by both parties, the giver of the interest and the receiver, the new holder of the membership interest agrees to follow the rules laid out in the various documents that govern the LLC. Such documents likely include the operating agreement and formation documents .

If the membership interest requires any initial or ongoing contributions to the business, the new interest holder is required to offer or continue such payments.

Aspects of Assignment of Interest to Keep in Mind

Depending on where the LLC is registered, the state might have specific laws regarding how assignment of interest is to be handled. Anytime major decisions or changes are happening in a business, it's always a good idea to double check the laws for the area.

Some states don't require the approval of LLC members for an assignment of interest, but they do limit the rights of the new member or receiver of the interest.

Operating agreements are the main governing power in such events, so an LLC might choose to forbid any interest assignments or transfers when they form the business. LLC members also reserve the right to lay out certain restrictions for interest assignments like the requirement of unanimous member approval.

The LLC's articles of organization may also include details regarding the assignment of membership interest.

If you need help with assignment of interest, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• LLC Membership Interest Transfer Agreement
• Transfer of Membership Interest in LLC: Everything to Know
• Assignment of Interest In LLC
• LLC Membership
• Assignment of Interest Form
• Can an LLC Be a Member of an LLC
• LLC Purchase Agreement
• LLC Board of Managers
• Sale of Membership Interest in LLC Form
• LLC Legal Structure

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Call for expressions of interest to serve WHO Youth Council (2024-2026)

The World Health Organization is pleased to announce the call for expressions of interest for the second term of the WHO Youth Council, running from 2024 to 2026 and hereby invites organizations to submit their expression of interest. Please read all instructions carefully.

About the WHO Youth Council

The WHO Youth Council aims to foster meaningful youth engagement within the WHO, leveraging the insights and expertise of diverse young people globally to shape health policies and strategies. The Council serves as a platform to amplify youth voices, promote public health, and support WHO’s efforts in strengthening youth contributions to health systems through advocacy and innovative initiatives. Please read more about the Council here .

Eligibility criteria

To be eligible for membership, organizations must meet all eligibility criteria outlined in the revised Terms of Reference. Please read through the Terms of Reference carefully, to fully understand the Council’s activities. We invite expressions of interest from organizations active on the international level, that are youth-led, youth-focused or a youth chapter in a larger organization. We are looking to select a mix of primarily health and non-health organizations.

We are asking all WHO Youth Council members to be a part of the WHO Civil Society Commission. If your organization is not yet a member, please submit your application here in addition to submitting your expression of interest for the WHO Youth Council. Please note, that for your expression of interest for the Council to be considered, a submitted application for the WHO Civil Society Commission suffices.

Application process

Interested organizations are required to complete the online application form available at WHO Youth Council Application Form . Additionally, applicants must submit the Tobacco-Arms Disclosure Form , which can be found here.  Applications will be reviewed based on adherence to the eligibility criteria, diversity considerations, and relevant motivation, plans and experience of the organization.

• Application deadline: 23:59 CEST, 6 September 2024
• First in-person meeting:  10 - 12 October 2024

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Starling marte plays another full rehab game as he nears mets return.

Starling Marte played nine innings with Triple-A Syracuse in his second consecutive full game during his rehab assignment and went 0-for-3 with a sacrifice fly. 

The outfielder, recovering from a right knee bone bruise, is expected to return to Citi Field on Saturday and possibly be activated on Sunday.

It will be curious how the Mets use the 35-year-old, who hit pretty well (.745 OPS) before the injury but had been a liability in right field. J.D. Martinez is their everyday DH, and lefty-hitting Jesse Winker was added at the trade deadline to hit righty pitchers. 

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Jeff McNeil’s two-run home run in the fourth inning was his 250th career extra-base hit, breaking a tie with Keith Hernandez and Todd Hundley for 17th all-time in Mets history. 

— Additional reporting by Bridget Reilly