Can a Manager Sell Half of an LLC?

by Fraser Sherman
The shareholder liability shield helps investors keep money in their pockets even if the business goes bust.


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A limited liability company has the tax advantages of a partnership and the liability protection of a corporation. Owners claim the company income and losses on their own taxes, but the LLC structure shields their personal assets from liability. The owners can run the company together, appoint one of their number as a manager or bring in an outside party. The manager's power to sell company equity or assets will depend on the situation.

Operating Agreements

LLC owners can spell out their business management rules in an operating agreement. Your state law may not require this, but it's still desirable so that the manager knows the limits of her authority. An agreement could, for example, state that the owners have to vote before the manager sells off business assets. If a manager exceeds her authority, her decisions may still bind the company if they're in "the ordinary course of business," as the Texas statutes put it. [ref2,3-101.254


If the company manager is one of the owners, he has a legal right to sell off his share of the company. Even if an owner wants to stay in the business, he may be forced to give up some or all of his ownership due to bankruptcy, personal debt or a divorce settlement. Many LLCs draw up a buyout agreement to cover this situation. The agreement spells out whether a departing owner can sell to an outside party, let his partners buy him out or at least give them a chance to match an outside offer.

Asset or Entity

Legally there's a distinction between a manager selling off your LLC's assets and selling off the company. A manager can't sell off another owner's half of the business, but depending on the operating agreement, she may have the authority to sell off half the assets. A buyer may prefer buying assets to buying the company: He doesn't have to go into business with the other partners and he's not assuming any debts or liabilities the LLC has acquired.


Even if the LLC agreement clearly limits the manager's authority, the manager's decisions may still carry weight. Texas law, for example, states that a manager can bind the LLC if the people he deals with have no reason to suspect he's exceeding his authority. In a Missouri case, the courts ruled that even though an LLC manager falsified documents to make it appear he had the authority to commit the business to a $725,000 loany, the LLC would still have to honor the loan.

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