You’ve been given an opportunity to partner with four other people in a growing venture. The venture is operated by a Manager-Managed LLC. You only know one of the members, who is not one of the appointed managers. If you put up $5,000 in cash, sweat equity drawing on your expertise and sign the operating agreement, you will receive 15% ownership interest in the business. Sounds great, right?
Well, it depends. Before signing on, you need to do your DUE DILIGENCE! Other than the necessary financial inquiries one should make to determine the solvency of the business and its value, ONE of the principal matters you should focus on is management of the business- namely, what say you will have in the decision making.
For example, if the LLC is Manager-Managed, what powers do the managers have? Can they be removed? If so, how? Is there anything that restricts their powers? Are there any decisions that require unanimous consent of the members? These are just a few very important matters someone interested in joining a Company as a member under these circumstances should be contemplating.
Have you been approached with an offer to partner on an exciting new opportunity? Do your due diligence! Before you decide ‘deal or no deal’, contact C&G to assist you!!
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