What’s Missing From Your LLC Operating Agreement?

Table of Contents

Introductory Article

  1. A New Series-What’s Missing From Your LLC Operating Agreement?

Ownership & Management Structure

  1. Does Your Operating Agreement Provide for Management by Managers or Members?
  2. Does Your Operating Agreement Allocate Ownership Interests in Terms of Membership Units or Percentage Interests?
  3. Are Membership Units and Stock the Same or Different?

Membership Changes & Transfers

  1. Does Your Operating Agreement State How a Person Can Cease Being a Member by the Company or Other Members Buying Their Membership Interest?
  2. Does Your Operating Agreement Address How and When a Member May Sell or Transfer Their Interests to a Third Party?

Decision-Making & Voting Rights

  1. Does Your Operating Agreement Explain When Members’ Consent Is Required For Significant Company Decisions?

Life Events & Member Protections

  1. Does Your Operating Agreement Cover What Might Happen if a Member Gets Divorced, Becomes Disabled, or Dies?

Capital Contributions & Financial Considerations

  1. Does Your Operating Agreement Address When Members Are Permitted or Required to Contribute or Withdraw Capital?
  2. Does Your Operating Agreement Provide for Tax Distributions?

Issuing Additional Equity & Membership Rights

  1. Does Your Operating Agreement Address When and How Additional Equity May Be Issued by the Company?
  2. Does Your Operating Agreement Have Multiple Classes or Series of Membership Units?

Dispute Resolution & Legal Protections

  1. Does Your Operating Agreement Address How and Where Disputes May Be Resolved?
  2. Does Your Operating Agreement Include Representations and Warranties Relating to Federal Securities Laws?
  3. Does Your Operating Agreement Require Members to Disclose or Forego Any Conflicting or Competitive Business Interests?

Restrictive Covenants & Intellectual Property

  1. Does Your Operating Agreement Have Restrictions for Competition, Solicitation, and Disclosure?
  2. Does Your Operating Agreement Specifically Address What Happens When an Employee Is Terminated and That Employee Is Also a Member?
  3. Does Your Operating Agreement Require Members Actively Involved in the Business to Assign to the Company All Intellectual Property They Create in the Course of Business?

Selling & Exit Strategies

  1. Does Your Operating Agreement Address When Most, but Not All, of the Members Want to Sell Their Ownership Interests to a Buyer?
  2. Does Your Operating Agreement Address a Situation Where a Buyer Wants to Purchase a Controlling Stake in the Business From Some, but Not All, of the Existing Members?