LLC Membership Admission Agreement for Virginia

MEMBERSHIP ADMISSION AGREEMENT
OF ,
A LIMITED LIABILITY COMPANY



This MEMBERSHIP ADMISSION AGREEMENT ("Agreement") is entered into on _____________ by and between _____________, a _____________ limited liability company ("Company"); all Company members as of the date of this Agreement and set forth in Exhibit A (individually and collectively "Current Members"), attached hereto and incorporated herein by reference; and (individually and collectively "New Member").

WHEREAS, Current Members and their respective membership interests in Company are set forth in Exhibit A;

WHEREAS, Company and Current Members desire to admit New Member as a member of Company in accordance with the terms and conditions of this Agreement and Company's operating agreement, originally dated _____________ and including any and all amendments and additions executed thereto ("Operating Agreement"); and

WHEREAS, New Member desires to acquire a membership interest in Company and be admitted as a member of Company in accordance with the terms and conditions of this Agreement and Company's Operating Agreement.

NOW, THEREFORE, for and in consideration of the mutual covenants and promises herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

  1. SALE OF INTEREST. Company and Current Members agree to sell and transfer to New Member an interest in Company and all its assets, in consideration of New Member's contribution as set forth in Exhibit B, "Amended Membership Composition, Capital Contributions, and Units" attached hereto and incorporated herein by reference.
  2. PURCHASE OF INTEREST. New Member agrees to pay as a purchase price for an interest in Company the amount and contribution value set forth in Exhibit B, payable upon payment terms set forth in Exhibit D, "New Member Contribution Payment Terms."
  3. NEW MEMBER ADMISSION. Upon execution of this Agreement and completion of the transfer of New Member's contribution set forth in Exhibit B and Exhibit D, Company and Current Members agree that New Member will be issued a membership interest according to Exhibit B and will be admitted as a full member of Company with all rights associated therewith as may be provided by this Agreement, the Operating Agreement, and all applicable laws.
  4. RECAPITALIZATION OF COMPANY, OWNERSHIP, AND CAPITAL ACCOUNTS. On New Member's admission as a member of Company, all parties agree that Current Members and New Member have and own the membership interest, units, and capitalizations set forth in Exhibit B.
  5. MEMBERSHIP ADMISSION AGREEMENT BOUND BY OPERATING AGREEMENT. A copy of Company's current Operating Agreement is attached as Exhibit E, attached hereto and incorporated herein by reference. New Member acknowledges that New Member
    1. has received a copy of the Operating Agreement;
    2. has received an adequate amount of time to review the Operating Agreement;
    3. has read the Operating Agreement and understands it and all its terms and conditions;
    4. has been advised and been given the opportunity to seek independent expert legal, tax, accounting, and management advice with respect to this Agreement, the Operating Agreement, and being a member of Company; and
    5. agrees to be a member of Company and be bound by all the terms and conditions of the Operating Agreement as if New Member was originally named in the Operating Agreement.
  6. NEW MEMBER'S REPRESENTATIONS AND ACKNOWLEDGMENTS. New Member further represents, acknowledges, and agrees to the following:
    1. Opportunity for Advice. New Member has been advised and been given the opportunity to seek independent expert legal, tax, accounting, and management advice in connection with New Member's investment in Company.
    2. General Financial, Tax and Business Experience. New Member has knowledge and experience, or has exercised the opportunity to seek advice from independent experts with relevant knowledge and experience, in financial, tax, and business matters sufficient to enable New Member to evaluate the merits and risks of the investment in Company and to make an informed decision about the acquisition of a membership interest in Company.
    3. Possible Loss of Investment; Illiquidity. New Member understands that New Member's investment in Company involves risk and New Member understands all the associated risks. New Member understands and acknowledges that it may lose some or all of its investment in Company, and New Member is financially capable of withstanding a complete loss of this investment. New Member also understands and acknowledges that membership interest in Company is an illiquid investment and cannot be sold, pledged, or traded, except as set forth in this Agreement.
    4. Access to Information. All financial statements, documents, records, and books pertaining to Company have been made available to New Member for inspection by New Member and New Member's representatives. New Member and New Member's representatives have had the opportunity to ask questions to, and receive answers from, Company or a representative of Company concerning New Member's investment in Company. All such questions have been answered to New Member's full satisfaction. No oral representations have been made or oral information furnished to New Member or New Member's representatives in connection with New Member's investment in Company.
    5. Negotiated Terms. The terms of this Agreement have been negotiated by New Member, and this Agreement fully and properly reflects the understanding of all parties.
    6. Interest Restrictions. New Member understands that New Member's membership interest has neither been registered nor will be registered under any applicable federal or state securities law, in reliance on available exemptions from registration. New Member understands that New Member's membership interest may not be sold, transferred, assigned, encumbered, pledged, conveyed, or otherwise disposed of unless it is registered or an exemption from registration is available under federal and state securities law. New Member represents it will strictly comply with the restrictions and provisions of the Operating Agreement.
    7. Authority. New Member has full legal capacity, right, power, and authority to make, execute, deliver, and perform this Agreement and each other agreement, instrument, and document contemplated to be delivered pursuant hereto or otherwise in connection herewith.
    8. Conflicts and Competition. New Member has disclosed all potential conflicts of interest and is neither engaged in, nor otherwise holds an interest in, any venture directly or indirectly in competition with Company's operations without Company's prior written consent.
    9. Common Legal Counsel. New Member, Company, and Current Members may, in the course of participation in Company affairs, be represented by or receive advice from common legal counsel. As such, New Member and Current Members understand that such counsel is not their independent counsel and are advised to consult with their own independent legal counsel concerning Company matters.
  7. APPLICATION OF PROCEEDS OF SALES OF INTEREST. If Company, Current Members, and New Member agree to apply any portion of the proceeds of sales of Company interest to New Member towards specific and limited uses, the proceeds application is set forth in Exhibit C, "Application of Proceeds of Sales of Interest" attached hereto and incorporated herein by reference.
  8. OPERATION OF BUSINESS. After the execution of this Agreement, Company's business will continue to operate in the manner provided by the Operating Agreement as an ongoing concern without interruption, except as may be modified by this Agreement.
  9. GENERAL TERMS
    1. Entire Agreement. This Agreement, including the Operating Agreement, constitutes the entire agreement between the parties with respect to its subject matter and supersedes any and all other previous or contemporaneous communications, representations, understandings, agreements, negotiations, and discussions, either oral or written, between the parties. The parties acknowledge and agree that there are no written or oral agreements, understandings, or representations directly or indirectly related to this Agreement that are not set forth in this Agreement. In the event of any inconsistency between the statements in the body and related exhibits of this Agreement and the Operating Agreement, the statements in the body and related exhibits of this Agreement control.
    2. Amendment of Agreement. This Agreement may not be altered or amended in any way except through written agreement of all parties hereto.
    3. Severability. If any provision of this Agreement or the application thereof is held to be invalid or unenforceable for any reason and to any extent, that provision will be considered removed from this Agreement; however, the remaining provisions will continue to be valid and enforceable according to the intentions of the parties and to the maximum extent permitted by law. If it is held that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision will be deemed to be written, construed, and enforced as so limited.
    4. Interpretation of the Agreement. Where appropriate in this Agreement, words used in the singular will include the plural, and words used in the masculine will include the feminine and the neuter. All headings that are used in this Agreement are for convenience only and will not be used to limit or construe any of its provisions.
    5. Multiple Counterparts. This Agreement may be executed in any number of identical counterparts, each of which, for all purposes, is to be deemed an original, and all of which constitute, collectively, one and the same instrument. The exchange of signature pages electronically to all parties constitutes execution and delivery of this Agreement.

IN WITNESS WHEREOF, the duly authorized representative of each party has executed and delivered this Agreement as of _____________.

Signed:

_____________________
Authorized representative of
_____________

_____________________
Date


_____________________
Print Name and LLC Title

EXHIBIT A
MEMBERSHIP COMPOSITION, CAPITAL CONTRIBUTIONS, AND UNITS PRIOR TO



[INSERT HERE THE CURRENT MEMBERS' OWNERSHIP STRUCTURE AS IT STANDS PRIOR TO THE NEW MEMBER ADMISSION]

EXHIBIT B
AMENDED MEMBERSHIP COMPOSITION, CAPITAL CONTRIBUTIONS, AND UNITS EFFECTIVE



Member Name

Capital Contribution

Capital Value

Units

Company Interest

EXHIBIT C
APPLICATION OF PROCEEDS OF SALES OF INTEREST



Member Name

Specific Use of Member's Capital Contribution

EXHIBIT D
NEW MEMBER CONTRIBUTION PAYMENT TERMS



Member Name

Contribution Payment Terms

EXHIBIT E
OPERATING AGREEMENT INITIALLY DATED



[INSERT OPERATING AGREEMENT HERE]

INSTRUCTIONS FOR YOUR MEMBERSHIP ADMISSION AGREEMENT



A membership admission agreement officially inducts new members into the company's existing ownership. New members must agree to abide by the terms and conditions articulated within this membership admission agreement and the company's operating agreement.

New membership admission should always be carefully and thoughtfully negotiated by all parties, as adding new members may drastically change the existing dynamics and operations of the company. On the one hand, adding new members is a method for raising capital, bringing in new assets, and absorbing new talent and expertise. On the other hand, the new members may require changes to company operations that differ from the existing framework established in the company's operating agreement. This membership admission agreement will guide your LLC through documenting the admission portion of the new membership induction where all members, current and new, agree to this ownership addition.

Important Note: Amending the Operating Agreement

As mentioned above, the terms of how to incorporate new members should be thoroughly discussed and documented. The scope of the membership admission agreement is limited to how new members are introduced and incorporated into the company. This membership admission agreement is not used to change the LLC's operating ground rules.

Admitting new members to your LLC may involve changing, updating, or revising part of the operating agreement. You may easily achieve this through LegalNature's LLC operating agreement amendment form. If the LLC does not have an operating agreement in place, we highly encourage the LLC to create one now with LegalNature's LLC operating agreement. These documents will ensure that your LLC continues to operate in the way it is intended by the owners.

Registered State

Select the state where the LLC is registered. This is the state where the LLC filed its original articles of organization or other equivalent formation document. This is not the state where the LLC is considered a foreign entity, even if the LLC may be required to register with those states as well.

For example, if an LLC registered as a domestic company in New Jersey and subsequently opens an additional office in Texas and applied to operate in Texas as a New Jersey company, New Jersey would be the registered state. In this example, Texas is the state where the LLC operates as a foreign company and has permission to do business there.

Agreement Dates

This agreement references the company's original operating agreement and all its amendments since all members affirm their agreement to abide by the company's operating agreement. The purpose of referencing the effective date of the original operating agreement is to clearly identify the correct documents and terms that all members are contractually obligated to uphold.

To clearly identify the original form of the operating agreement, select the date your initial operating agreement was entered into in the "Effective Date of Original Operating Agreement" field. Then, determine and select the date this agreement will go into effect in the "Effective Date of This Membership Admission Agreement" field.

Member Information and Their Contributions

The LLC's membership and its associated ownership interest should always be kept up to date. Instead of making confusing piecemeal changes to your document, this membership admission agreement is designed to gather all membership information in one place for a clear and concise overview of the LLC's ownership structure. As adding new members is a change in the membership composition and contribution, make sure to enter all members, their respective contributions, and their respective ownership interests as it stands after this agreement goes into effect. Include all current members and newly admitted members, but exclude the information of any member who has been removed.

For ownership units, an LLC may choose to create different classes of units, shares, or stocks for newly admitted members. If so, enter all unit classes and each member's associated ownership number of those specific unit classes. For example, if there are Class A and Class B shares issued for the same member, you may enter "10,000 Class A Shares and 500 Class B Shares."

Contribution Payment Terms

One of the terms new members and current members must agree on is the payment or transfer terms of new members' contributions, if any. This establishes the timing and amount of contributions that the company can expect to receive as the infusion of capital, asset, or talent and plan its business strategy and operations accordingly.

This agreement's default position is that new members' contributions are payable upon execution of this membership admission agreement. However, if new members' contributions to the company will be made in multiple installments over a period of time, this should be articulated in the "Installment Contribution Payment Terms (Optional)" field. For example, the payment terms may be divided into five equal payments due on the last day of each month. Alternatively, the payment terms may also consist of a list of due dates with different payment amounts associated with each date.

Financial Representations and Acknowledgments

As with other types of investments, there are rules and regulations for the company and members to abide by. One such rule for LLCs treated as S corporations for tax purposes is that owners of the LLC must be United States citizens or residents pursuant to IRS Code Section 7701. Therefore, if your LLC is treated as an S corporation for tax purposes, every new member will acknowledge that they are U.S. citizens or residents pursuant to IRS Code Section 7701 and will notify the company if their residency status changes, as this affects the company's tax status. Please consult an attorney or tax specialist if you have any questions about the LLC's tax treatment or the new members' residency status under IRS Code Section 7701.

Another rule for investments into companies is that if a company sells interest in the company to a limited number of people, defined as "accredited investors" according to the Securities Act of 1933, Regulation D, Rule 501, then the company does not need to register the securities offering with the United States Securities and Exchange Commission (SEC). If the company's new members qualify as accredited investors, this should be represented and acknowledged so the company can rely on the acknowledgment for any required compliance with the SEC.

Please note that even when new members are accredited investors and the LLC may be exempt from registering the securities offer with the SEC, the company may still need to file "Form D: Notice of Exempt Offering of Securities" with the SEC. You can find more information below in the Final Steps under the section titled: 'File Form D "Notice of Exempt Offering of Securities" with the SEC.'

Audit of Company Books

New members generally prefer the company books to accurately reflect their additional contributions and interests in the company immediately after the transfer of the new members' contributions. Select "Yes" if the company will update the accounting books to immediately reflect the infusion of funds from the new members.

Application of Proceeds

New members can also negotiate how their contribution will be applied and used by the company. If the new members and the current members agree on the specific use of new members' contributions of money or other assets, then this should be specified in the "Application of Contribution Proceeds" field for each member. The application of any and all proceeds toward specific uses will appear in Exhibit C: Application of Proceeds of Sales of Interest.

Notary

LLC documents generally do not require notarization as part of its execution formalities. However, notarization may be a requirement under your LLC's operating agreement as a first line of defense against fraud. It could also be required from third parties such as banks with their own signing and witness policies. To avoid any paperwork delay, select "Yes" and LegalNature will include notary acknowledgment forms for your convenience.

Exhibit A: Membership Composition, Capital Contributions, and Units

Insert a copy of the company's ownership structure as it stood before any new member was admitted. This generally includes all members' names, contribution descriptions and values, and interest units and percentages in the company. This information can usually be located in your operating agreement, in company resolution records, or in a previous membership admission agreement.

Exhibit B: Amended Membership Composition, Capital Contribution, and Units

This exhibit compiles all ownership and members' contribution interests in one place for an overview of all the LLC's owners. Refer to this exhibit to see what and how much each member contributed to the company and how much of the LLC is owned by each member in return for their contributions.

Exhibit C: Application of Proceeds of Sales of Interest

This exhibit details any agreement between the company and all members on how to use specific contributions from members. For example, if a member contributed money and all parties agree that this member's money can only go toward a certain project, such information would be specified here. If the members do not have any stipulation and agreement on how to use their contribution, and allow their contributions to be used in any way the company sees fit, the "Specific Use of Member's Capital Contribution" column in this exhibit will indicate "N/A."

Exhibit D: New Member Contribution Payment Terms

This exhibit details the payment terms for new member's contributions for an easily accessible chart on the LLC's expected contribution influx.

Exhibit E: Operating Agreement

Insert the company's effective operating agreement and all applicable amendments here. This ensures that all members, current and new, have a copy of all operating procedures for the LLC and can refer to it if any questions should arise.

Final Steps

Current Members' Vote and Resolution to Add New Members

An LLC does not have very many company formalities, but adding new members is a significant change in ownership structure. It is advisable for the current members of the company to take an official vote and pass a resolution to admit the new members. You can use LegalNature's corporate resolution form to easily and professionally document this resolution for the company records.

Amend Articles of Organization

Certain states require an amendment to the LLC's articles of organization (also known in other states as a "certificate of formation" or "certificate of organization") filed with the state when new members are admitted. Be sure to check with your Secretary of State or the equivalent state agency to determine whether your LLC needs to update its articles of organization with the new members' information. States generally do not require the actual membership admission agreement to be filed with the state.

Employer Identification Number (EIN)

If this membership admission agreement changes your LLC from a one-member LLC to a multi-member LLC, and you have been operating the LLC under your own Social Security number for tax purposes, then you should apply for an Employer Identification Number (EIN) after the new members are admitted. As a one-member or one-owner LLC, you can hire and operate under your own Social Security number. However, with multiple owners of the LLC, the LLC requires its own EIN that is separate from the owners' personal identity for tax purposes. You can apply for an EIN from the IRS directly on the IRS website.

File Form D "Notice of Exempt Offering of Securities" with the SEC

Under the Securities Act of 1933, any offer to sell securities or interest in companies must either be registered with the SEC or meet one of the three exemptions listed under Regulation D of the Securities Act, Rules 504 to 506. You should consult an attorney or the SEC if you have any questions regarding your company's offering and whether it falls within the exemptions.

For most small businesses, it is likely that it will fall within one of the exemptions to SEC registration. If so, the small business does not have to register its securities offering with the SEC. However, the small business is still required to inform the SEC of the reasons for the company's exemption. Exempt LLCs still must file a Form D, "Notice of Exempt Offering of Securities" electronically with the SEC within 15 calendar days after the LLC first sold its securities.

Form D is a brief notice that includes the names of the company, owners, and officers as well as some broad strokes about the offering. It does not include information about the company's detailed finances. Form D can be found here. Also, a helpful guide on how to file Form D can be found here. You may also search the SEC EDGAR database for Form D filings by other small businesses for samples on how to complete and file Form D.

File Form D "Notice of Exempt Offering of Securities" or Equivalent with the Registered State

More and more states are mirroring the SEC by requiring notice of securities offering from small businesses. The LLC should check with its state securities regulator for the current state requirements. The SEC directs small businesses to get the address and telephone number for your state securities regulator by calling the North American Securities Administrators Association at (202)737-0900 or by visiting its website.

Please note that the language you see here changes depending on your answers to the document questionnaire.
Business Business Formation

LLC Membership Admission Agreement

A membership admission agreement helps an LLC officially bring new members on board as company owners. It ensures the company integrates the new members and their valuable contributions.

LegalNature's LLC membership admission agreement updates your LLC ownership with new members' names, contribution descriptions, payment terms, interests sold, and specific applications of contribution proceeds. It maintains business operations according to the LLC's operating agreement and ensures that all members continue to be protected from taking on personal liability for company debt.

Get started now with LegalNature's step-by-step guide to create your LLC membership admission agreement.

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