Legal Question in Business Law in California
Buy-sell agreement for small consulting firm
Two people are forming an LLC providing consulting services. One is a venture capitalist and the other is the consultant. They share 50% ownership. It is anticipated that the venture capitalist will force a buy-out of his interest after an initial period (say 3 years.) The buy-out value is based on fair market value of the firm (method TBD). If and when this right is exercised, if the consultant partner simply terminates employment and abandons the LLC, may he be held personally liable for any money owed to the venture capitalist? If sued, could he successfully argue that the fair market value of the firm is $0 without his services (ignoring any hard assets, which are expected to be trivial) and therefore no buyout is required?
3 Answers from Attorneys
Re: Buy-sell agreement for small consulting firm
You have posed a question which requires legal research...please retain an attorney....and get formal legal opinion from them.
Re: Buy-sell agreement for small consulting firm
I am very sorry, but this is beyond my expertise. However, if you do have any need for estate planning, please contact me at the (408) 268-2580.
Re: Buy-sell agreement for small consulting firm
Since the consultant will own part of the company and will be selling his interest, a properly drafted non-compete agreement would help to protect the venture capitalist's interests. The agreement could not require the consultant to work for the company, because the Thirteenth Amendment outlawed slavery; but it could prevent him from working for anyone else, including himself.
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