A Class B Unit Agreement is a contract defining the terms and conditions of investment in a limited liability company (LLC) through Class B units. These units represent ownership interest in the company, but differ from other unit classes in terms of the distributions, rights, and obligations they convey.

Class B units can be used to attract passive investors, providing them with a share in profits and losses without voting rights. They can be a useful tool for LLCs looking to raise capital without diluting the control of the current management team, as the Class B unit holders don`t have the right to vote on major company decisions.

Class B unit agreements typically outline the following terms:

1. Capital Contributions: The amount of capital that Class B unit holders are required to contribute initially and if additional capital is needed in the future.

2. Distributions: How and when distributions to Class B unit holders will be made (usually once a year, or whenever the company generates profits).

3. Rights: The specific rights of Class B unit holders, including their right to receive financial statements and participate in any future profit distributions.

4. Obligations: Any obligations that Class B unit holders have, including confidentiality and non-disclosure agreements.

5. Termination: The circumstances under which the Class B unit agreement may be terminated, and how any remaining capital will be distributed.

It`s critical to create a well-drafted Class B unit agreement that is legally enforceable, provides clear guidelines for investing and highlights the rights and obligations of Class B unit holders.

Creating a Class B unit agreement can be a complex task. It is essential to consult with an experienced attorney to ensure all legal requirements are met, and all parties are protected. An attorney experienced in business law, especially with LLCs and corporate transactions, can assess the particular circumstances of your company and assist you in creating an effective agreement.

In conclusion, a Class B unit agreement is a valuable tool for LLCs looking to attract passive investors and raise capital without diluting management control. It is crucial to consult with an experienced attorney to ensure such agreements are legally enforceable and meet the requirements of all involved parties.