Are you working on an LLC startup company? Pay attention to the operating agreement. Download sites want to give you boilerplate forms and tell you that’s all you need to get into business in California. These documents do not address the genuine issues all business owners are likely to face, nor do they preserve the continued operation of the business when an unexpected event happens. You have invested all of your hard work, time, money, creativity and efforts to build your new LLC. How important to you is it to protect your company?
Pay Attention to the Operating Agreement
California is one of the most complex states in which to form a new business entity. The LLC is usually a small, closely-held company with a few owner “members.” Many entrepreneurs and new business owners do not understand the importance of the operating agreement in an LLC.
After all, what can go wrong?
Pay attention to the operating agreement.
The business formation and startup attorneys at the Watkins Firm have served small businesses in San Diego and Southern California for more than 40 years. We’ve seen it all, and can’t tell you the number of times a dispute arises between business owner members due to a poorly constructed or non-existent LLC operating agreement.
What happens if one of the co-owning members dies or becomes incapacitated due to illness or an unforeseen accident? More commonly, one of your co-owners gets divorced and their interest in the business becomes fodder during the divorce proceedings. Do you want to deal with the genuine possibility that a fellow member’s spouse may gain a voting interest and become your new business partner as well? How can the operating agreement help to protect your company and all you’ve worked so hard to build?
What happens when there is disagreement as to the direction of the company? Another very common example is one (or more) of the parties not pulling their weight or living up to their end of the bargain. How do you buy-out a fellow member in an LLC? If a member wants to sell their interest in the company who has first right to buy the outstanding shares? These issues lead to business disputes between co-owners of an LLC and ultimately time consuming and expensive business litigation. Protect yourself. Protect your company. Pay Attention to the Operating Agreement.
Let’s discuss your corporate documents and the valuable advice and counsel we provide as we help with the startup of your new venture. We have developed a proprietary library of proven, successful LLC corporate documents and operating agreements which are battle tested. We simply tailor proven LLC corporate documents to your unique circumstances and walk you through the process and each important decision.
Look, you’re going to need an experienced business attorney/general counsel, a CPA/Tax professional and a source of funding/banker. These are the three critical partners a business requires to succeed and thrive. We’ve been here in San Diego for more than 40 years. We provide our clients with contacts in the industry, sound advice and counsel and a business partner and counsel they can pick up the phone and call at any point along the way.
Our clients value not only our legal work, but the quality and timeliness of our business experience and advice as general counsel. But, if you learn nothing else from taking a moment to read this blog remember this: Pay Attention to the Operating Agreement.
We invite you to review our Podcast Episode 2 – Starting a Business as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
