How to structure a partial buyout for an LLC within SBA guidelines?

by a searcher from University of Illinois at Urbana-Champaign

7 months ago

Hi All,

Currently structuring a deal to submit an LOI on, and the seller would like to retain 10-19% ownership in the company so that he can pass that along to his son-in-law, who will remain in the business as a GM. 

He's open to a transaction where 100% is purchased, but equity is sold afterwards, as well as, just rolling over equity in the initial transaction.

This would seem straightforward in a stock sale, especially given the new SBA guidelines, but as the business is an LLC, I'm at a loss for how this can be accomplished. 

Does anybody know how this deal can be structured?

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searcher from University of Illinois at Urbana-Champaign

This is exactly what I was looking to understand - thank you Brad!

7 months ago | like reply | 0 likes

lender from Eastern Illinois University

Under the new SBA rules you would have to do a membership interest purchase and acquire 81% to 90% of the membership interest of the company. The existing company would be the borrower and the seller would retain the other 10 to 19% of the membership interest. Rollovers of equity into new companies are not allowed under the SBA partial buyout rules. I hope this helps to clarify. If you have additional questions you can reach me here or directly at --@----.com Good luck.

7 months ago | like reply | 1 like

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