LLC Member Exit and Buyout Options Memo
When a member of an LLC wants out, wants to buy out a co-owner, or is in a deadlock, and you need a structured view of the exit routes the operating agreement actually provides.
Business partner separations are high-stakes and emotional, and the operating agreement usually decides more than the client realizes. Withdrawal rights, buy-sell triggers, valuation formulas, transfer restrictions and deadlock clauses interact, and a provision buried in an amendment can change the price or the timing of an exit significantly. Before advising, counsel needs a clear map of every route out and what each one is worth to the client.
This prompt pastes the operating agreement and related documents first, then describes the client's interest, the other members, the facts and the goal. Claude quotes each exit-related provision or marks it not addressed, then lays out each realistic path (negotiated buyout, contractual buy-sell, third-party transfer, withdrawal, dissolution) with the steps, likely value outcome, leverage points and risks. It ends with open facts to gather and questions where state default law will control.
Where the agreement is silent, the state LLC statute and case law fill the gaps, and the prompt keeps those as research questions rather than letting Claude describe the law from memory. Valuation outcomes are only as reliable as the inputs. The memo is an internal draft: the responsible attorney should verify the provisions, research the default-law questions, and decide what to advise.
The Prompt
<operating_agreement> [PASTE THE FULL OPERATING AGREEMENT WITH ALL AMENDMENTS AND SCHEDULES] </operating_agreement> <related_documents> [OPTIONAL: PASTE ANY BUY-SELL AGREEMENT, EMPLOYMENT OR SERVICES AGREEMENT WITH THE MEMBER, PROMISSORY NOTES, OR PERSONAL GUARANTEES] </related_documents> <situation> We represent: [MEMBER NAME], who holds [PERCENTAGE] of [LLC NAME], a [STATE] LLC. Other members and interests: [NAMES AND PERCENTAGES] Management: [MEMBER-MANAGED / MANAGER-MANAGED; WHO MANAGES] What happened: [BRIEF FACTS OF THE DISPUTE OR SEPARATION] Client's goal: [e.g., exit and be paid fair value; buy out the other member; keep operating] Timing pressures: [ANY] </situation> Write an options memo for our client based on the operating agreement. Part 1. Provision review. For each of the following, quote the governing provision with section number, or state "Not addressed": - Voluntary withdrawal or resignation rights and their consequences - Buy-sell triggers (death, disability, termination of services, deadlock, voluntary sale, other) - Valuation method, appraisal process and payment terms - Transfer restrictions, rights of first refusal and drag or tag rights - Deadlock resolution - Dissolution triggers and winding-up process - Restrictive covenants affecting the departing member - Capital account, distribution and guaranty issues on exit Part 2. Options. For each realistic path (for example, negotiated buyout, contractual buy-sell, transfer to a third party, withdrawal, dissolution), give: how it starts under the agreement, the steps and deadlines, likely value outcome for our client, leverage points, and risks. Part 3. Open questions. List (a) facts we need from the client and (b) questions where the agreement is silent and [STATE LLC ACT] default rules or case law will control. Do not state what the statute provides unless it is in the pasted text. Quote the agreement for every conclusion and flag inconsistencies between sections. This is a draft for attorney review, not advice to the client.
Example Output
A three-part memo quoting each exit-related provision, comparing realistic separation options with steps, value outcome, leverage and risk, and listing open facts and default-law questions.
Illustrative example — names, figures, and facts are fictional.
OPTIONS MEMO (DRAFT): Member Exit, Copperwick Brewing LLC (fictional) Client: Dana Faulk, 40% member | Other members: R. Ostrowski 40%, J. Ng 20% | Manager-managed (Ostrowski) Goal: Exit and be paid fair value within the year PART 1. PROVISION REVIEW - Voluntary withdrawal: Sec. 9.1: "No Member may withdraw from the Company prior to its dissolution." Withdrawal is not available by contract. - Buy-sell triggers: Sec. 10.2 lists death, disability and "Termination of a Member's Services Agreement." Voluntary sale is not a trigger. - Valuation: Sec. 10.4: price is "the Fair Market Value as determined by an independent appraiser selected by the Manager," with "a discount of twenty-five percent (25%) for lack of control and marketability." - Payment terms: Sec. 10.5: 20% down, balance over five years at prime. - Transfer restrictions: Sec. 8.2 requires Manager consent; Sec. 8.3 gives the Company and then members a right of first refusal. - Deadlock: Not addressed. - Dissolution: Sec. 12.1(b) on "the vote of Members holding at least seventy-five percent (75%) of the interests." - Inconsistency: Sec. 10.4 says the Manager selects the appraiser; Amendment No. 1, Sec. 2 says the appraiser is "mutually agreed." Confirm which controls. PART 2. OPTIONS A. Negotiated buyout. Starts by agreement. Value: open to negotiation; the 25% discount in Sec. 10.4 anchors the other side. Leverage: the other members hold 60% and cannot reach the 75% dissolution vote in 12.1(b) without Faulk. Risk: low cost, depends on goodwill. B. Third-party sale. Requires Manager consent (8.2) and ROFR (8.3). Risk: consent may be withheld. C. Dissolution. Faulk cannot reach 75% alone. Judicial dissolution depends on [STATE LLC ACT]. Risk: costly and slow. PART 3. OPEN QUESTIONS Facts: Does Faulk have a Services Agreement? Any personal guaranty on the bank line? Default law: Does [STATE LLC ACT] permit judicial dissolution or a member buyout remedy on these facts? Is the Sec. 9.1 withdrawal bar enforceable as written? Draft for attorney review.
Tips
- •Paste every amendment. Buy-sell and valuation terms are often changed after the original agreement is signed.
- •Include the member's employment or services agreement if there is one. Termination of services can trigger a buyout at a discounted price.
- •Ask Claude to model the buyout payment under the valuation formula with sample numbers, then check the arithmetic yourself.
- •Treat every default-law question as research to do and verify. LLC statutes differ significantly by state on withdrawal and dissolution.
- •Keep the memo internal until reviewed. It is a draft for attorney review and should not go to the client as written.
Frequently Asked Questions
Can Claude tell me whether my client can force a buyout?
It can show whether the operating agreement gives your client a contractual right to trigger a buyout and quote the provisions that matter. Whether a court would order a buyout or dissolution when the agreement is silent depends on the state LLC statute and case law. The prompt lists those as open questions for you to research and verify rather than answering them from memory.
How should I handle the valuation numbers?
Ask Claude to apply the agreement's valuation formula to sample or real figures you provide, including any discounts and the payment schedule. Check the arithmetic yourself. Claude cannot appraise the business, and the actual value will depend on an appraiser or negotiation. The useful output is a clear picture of how the formula affects your client compared to a negotiated price.
Can I use this if we represent the remaining members instead?
Yes. Change the situation block to identify your clients and their goal, for example retaining the business and buying out the departing member on the best terms. The provision review stays the same, but the options and leverage analysis will be written from your clients' side. Keep the open questions section, since the same default-law gaps matter to both sides.
What related documents matter most?
Any separate buy-sell agreement, the departing member's employment or services agreement, promissory notes, and personal guaranties of company debt. Services agreements often decide whether a buyout is triggered and at what price, and guaranties are a frequent sticking point in negotiations. Paste them in the related documents tag so Claude reads them alongside the operating agreement.
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