I am writing to request info. about “exit strategies” for a member to actually leave a real estate LLC- should circumstances require it. I am in the process of putting parameters of the club in place and would like to cover this possibility.
I am wondering how assets are divided, (based on appraisals, tax value? and at whose expense? etc.) Any experience or insight about how this can be handled would be appreciated.
Thank you!
Michael Craig
you must plan for this as it is a real possibility; its a difficult situation becuase 1) the LLC will have illiquid assets (real estate) 2) liquidating those asset to cash someone could have serious tax implications and cost and impact to profit potential.
I was in an investment LLC about 10 years ago. I think the way this was handle was that 1) each members share was calcuated based upon REALIZED gains 2) other members of the LLC had first right of refusal to buy people out. I think there was some type of clause that only made it possible to exit by finding someone to purchase your membership interest (i.e. no distribution would be made to cash people out). This way the remaining mebers interest (and future profits) are not jeopardized by one members exit.