Joinder Agreement

An exhibit to many limited liability company operating agreements, a joinder agreement is the document pursuant to which an outside third party transferee is admitted as a member (a member is an owner) and becomes a party to, and bound by, the terms of that operating agreement. The document is therefore an effective way to easily add a new owner to an LLC without drafting up an entirely new partnership agreement between the owners of the company and starting from scratch. It’s rare that a joinder agreement is entered into at a later date if not attached to an operating agreement already in place when the joining party intends to join. So, it is important that, when finalizing an operating agreement, the members of the company decide amongst themselves if they would like to include a joinder agreement as part of the operating agreement to allow for a simpler way of adding in new owners to the company at a later date. Despite the fact of their helpfulness, joinder agreements are not used that often in practice by company owners. Often when a business is ready to transition – that is, add new owners – that leads to additional discussions amongst the current owners and potential new owners, and new issues are raised that need to be dealt with, such as how to properly value the company at the time of the transition.