On the Path to Forming a LLC? Make Sure You Have Your “Roadmap!” (part 2) 

In part two of this blog on operating agreements, I detail just a few more components of the contract needed between members to govern an LLC.

·      Admission and Withdrawal of Members- An operating agreement should detail the process, the voting power required for approval, and the requirements for the admission and the withdrawal of LLC members.  

·      Delegation of Rights and Duties Between Members- Your operating agreement should outline the types of power and authority each individual member or manager has in overseeing business affairs. This could include the ability of a member to encumber the company with debt or to sign contracts on the company’s behalf.

·      Avoiding or Resolving a Deadlock- An operating agreement should be structured in a way that helps to avoid a deadlock i.e., a disagreement regarding the business that results in an ability for the company to move forward. For example, 50 – 50 ownership and voting power in a LLC with two members should be avoided. If there is a deadlock, however, the operating agreement should provide steps for its resolution. 


These two blogs are not an exhaustive list of what an operating agreement includes but,  hopefully these posts have helped you understand some of what needs to be hashed out in starting a multimember limited liability company.