Introduction:
When forming a partnership or limited liability company (LLC), it is essential to have a written agreement that outlines the capital contributions of each partner or member. This agreement is known as the capital contribution agreement. In this article, we will be discussing what a capital contribution agreement is, why it’s important, and provide a sample capital contribution agreement.
What is a Capital Contribution Agreement?
A capital contribution agreement is a written document that outlines the capital contributions of each partner or member in a partnership or LLC. It includes the amount of money, property or services that each partner or member will contribute to the business. The agreement also outlines the terms and conditions for the contributions and the ownership interest that each partner or member will receive in the company.
Why is a Capital Contribution Agreement Important?
A capital contribution agreement is important for several reasons:
1. It ensures that each partner or member is aware of their financial obligations and responsibilities in the business.
2. It provides clarity on the ownership interest of each partner or member in the company.
3. It helps prevent disputes and misunderstandings between partners or members regarding contributions and ownership.
4. It can be used as evidence in court if there are legal disputes between partners or members.
Sample Capital Contribution Agreement:
[Company Name] Capital Contribution Agreement
This agreement is made on [Date] between [Name of Partner/Member 1], [Name of Partner/Member 2], and [Name of Partner/Member 3] (collectively referred to as “Partners/Members”) for the purpose of forming a partnership/LLC under the laws of [State].
1. Capital Contributions: Each partner/member agrees to contribute the following to the partnership/LLC:
– [Name of Partner/Member 1]: [Amount] in cash.
– [Name of Partner/Member 2]: [Amount] in property.
– [Name of Partner/Member 3]: [Amount] in services.
2. Ownership Interest: The ownership interest of each partner/member in the partnership/LLC will be determined based on the value of their respective capital contributions.
3. Terms and Conditions: The following terms and conditions apply to the capital contributions:
– The contributions shall be made on or before [Date].
– Any additional capital contributions shall be made based on the agreement of all partners/members.
– The value of any non-cash contribution shall be determined by an independent appraiser.
– Partners/Members shall not withdraw their capital contributions except as provided in this agreement.
4. Withdrawal of Capital Contributions: A partner/member may only withdraw their capital contribution under the following circumstances:
– With the agreement of all partners/members.
– Upon the sale or liquidation of the partnership/LLC.
– In the event of death, disability, or bankruptcy of the partner/member.
5. Dispute Resolution: Any dispute arising out of this agreement shall be resolved through mediation or arbitration.
6. Governing Law: This agreement shall be governed by the laws of [State].
7. Entire Agreement: This agreement constitutes the entire agreement between the partners/members and supersedes any prior agreements or understandings, written or oral.
[Signatures of Partners/Members]
[Date]