One of the questions I wish clients would ask more is whether their division of ownership is a fair one. Most owners, in their fairness calculation, apply the following formula: 100% ÷ number of founders This advanced calculus may appear fair and equitable, but the reality is that it ignores many dimensions of the co-founder […]
Continue ReadingOperating Agreements
What is an operating agreement?
An LLC Operating Agreement is a legal document that outlines the duties, rights and ownership percentage of the all the members who own the LLC. All of the owners must sign this document. It usually sets forth the financial arrangement of the members, how profits and losses are distributed, who has management rights, and what kind of […]
Continue ReadingThe Emporer Has No Clothes: The LLC Without an Operating Agreement
In an earlier post, I discussed the pitfalls of using a one-size-fits-all operating agreement, especially for real estate investing. What about when an LLC has no operating agreement at all? This is a common scenario when someone files the articles of organization with their state’s secretary of state and declares the job well done. Usually, it’s […]
Continue ReadingLLC Timebombs: Have you read your Operating Agreement lately?
Potential clients often ask me, “why do I need a lawyer if an LLC is so easy to form?” Sure, it doesn’t take much effort to log on to the Secretary of State’s website, but there is much more to LLC formation than just putting your name into a form and paying $125. An LLC […]
Continue ReadingWhy a Single-Member LLC Needs an Operating Agreement
How easy is it to form a single-member LLC? Most investors log onto their Secretary of State’s website, pay their fee and file the state form to create their LLC, and think they’re done. Unfortunately, that’s not the whole story. A limited liability company needs to have rules about operating itself, what happens when it’s dissolved, […]
Continue ReadingMcConnell v. Hunt Sports Enterprises: How the Columbus Blue Jackets shaped LLC law
Back in 1996, the NHL approached the mayor of Columbus about starting an expansion franchise in that city. The subsequent dealings among the partners of the enterprise ignited a legal controversy that eventually led to the award of $920,000 in legal fees, and set a precedent for modifications to fiduciary duty in LLC operating agreements. […]
Continue ReadingFive things your Ohio LLC operating agreement can NEVER do
And how you can get around it. The Ohio law governing limited liability companies generally allows the operating agreement to determine how the LLC is operated. The operating agreement governs the relationship between members, the behavior of managers, and how the members get paid. There are a few exceptions to this broad law that might […]
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