Why is it important to review and understand your LLC operating agreement at the outset of business formation? Your business attorney should walk you through each of the optional clauses and the impact each option will have upon your company and those who will own an interest in it. If there is going to be more than one member in your LLC you need to thoroughly discuss and review the operating agreement with your own experienced business attorney at the Watkins Firm.
The Operating Agreement Should Stop Most Disputes Before They Ever Get Started
A well crafted and effective LLC operating agreement can prevent many disputes from arising between the members who own the company. The operating agreements of many LLCs we review have often been downloaded from some site, or copied right off of the web. Most do not contain important legal clauses required in California to protect majority owners from minority interests.
Surprisingly, few actual LLC operating agreements really get to the core issues that represent the source of most disputes that threaten the very life of the company, including:
- The Death or Incapacity of a Member Owner
- Personal Life Crises such as Divorce or Bankruptcy
- How to Bring In a New Investor
- Clear Definitions of Roles and Job Responsibilities for each Member Owner
- How “Profits” will be Defined and Distributed
An effective LLC operating agreement is a critical corporate document, and each of these issues and several others must be discussed, agreed upon and incorporated into the operating agreement. The process to review and understand your LLC operating agreement should be done when the LLC is being formed, as everyone is cooperating and a spirit of enthusiasm and excitement surrounds the projects. Issues are clearer, and minds are free of the type of clutter that arises over the course of owning and running a small business with others.
Review and Understand Your LLC Operating Agreement with an Experienced, Proven Business Attorney
If you are going to invest all of your time, energy and money into a new business venture isn’t it worth a few moments up front to make sure all of that work and investment is protected? The Watkins Firm has more than 40 years of experience as business formation attorneys and general counsel here in San Diego and Southern California.
“The vast majority of business disputes between owners of an LLC are about money,” says Dan Watkins, founding partner of the Watkins Firm. “Money has a strange effect on people. I’ve seen it too many times. Everything is great between the parties at the outset, but once the money starts coming in people tend to forget anything that isn’t in writing from the outset. It is SO important to get the operating agreement right up front. That way, you can look at the operating agreement and it makes clear what is to happen. It absolutely prevents expensive and time-consuming disputes before they ever start.”
San Diego Business Attorneys with More than 40 Years of Experience
The Watkins Firm are experienced San Diego business attorneys with more than 40 years of experience. If you are starting an LLC or didn’t take the time to really review and understand your LLC operating agreement at the outset of business formation it’s not too late.
Your Watkins Firm attorney will discuss each clause or issue to ensure sound decisions are made out the outset of forming a new entity. You are about to pour a lot of money, hard work, time and personal energy into making your new company grow and thrive. An effective LLC operating agreement can prevent future member disputes, saving a lot of time, money and hassle.
If you would like to find a reasonable legal partner who can draft or review an effective LLC operating agreement, or need experienced proven attorneys to help resolve a dispute between owner members, we invite you to review our Podcast Episode 3 – Corporate Documents as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
