QUESTION
Does the buy in partner have controlling right to how those funds are used, or do those funds allow them the right to future receivables?
Asked on Nov 10th, 2016 on Estate Planning - California
More details to this question:
I own business ABC. I recently had a partner buy in to the business and we went and formed ABC, LLC. The buy in funds are being used by my business during our transition to a larger facility.
3 ANSWERS
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The buy-in is usually split among the existing partners, not put into the business. Then everyone has a fractionally smaller share to account for one more partner, and everything continues to be split according to the new fractional interests. The "consideration" for the buy-in is that each partner will now have a smaller share of profits, and the buy-in is to off-set that reduction. But its whatever you agreed. If there wasn't any agreement, you are headed for trouble.
Answered on Dec 21st, 2016 at 5:14 PM
That depends entirely upon what the contract between you provides for. There may be a standard used by your industry, but you would need to check with the association your business is in.
Answered on Dec 15th, 2016 at 5:19 PM
This is negotiable not a matter of law. You should have a partnership or operating agreement.
Answered on Dec 15th, 2016 at 5:18 PM