WHAT IS A MEMBERSHIP INTEREST AND HOW IS IT VALUED?
A membership interest is that bundle of rights owned by each member. These rights include the right to vote and to share in the profits and losses of the company. A membership interests depends on the value of the company. A company can be valued in a variety of ways. The operating agreement you may create using this website offers two of the most common choices for valuing a business, briefly described as follows: 1) Appraisal Method: Using this method, an appraiser is hired to value the company. If the parties cannot agree to the same appraiser, then each party hires an appraiser. Depending on the results of the appraisals, a third appraiser may need to be hired. This method is more costly then the alternative because of the fees to be paid to an appraiser. 2) Capitalization of Earnings Method: Using this method, the value of the company is based on a twenty-four month “rolling average” of the company’s net profits, less debts plus cash.
