The American Bar Association tackles Delaware LLC operating agreements and general business practices in a new article featuring IncNow President, John Williams.
Williams serves as a key contributor in “Operating Agreements Today: The Foundation to Avoid Controversy Tomorrow,” found in the ABA’s Probate & Property magazine. The passage outlines common oversights when forming an LLC, placing an emphasis on protecting individual members from risks, including those within their own LLC Operating Agreement.
Typically members are cautious to distance themselves from outside liability, though in Williams’ experience the Operating Agreement is also essential to protect members in the event of failed business partnerships that can stem from a myriad of possibilities. For instance, the article examines a situation in which a business partner passes away and the remaining member is left to do business with her executors, an aspect not covered in their original Operating Agreement. It highlights the need to plan for internal risk and emphasizes the difficulty faced when LLCs operate without a complete and thorough Operating Agreement protecting the individuals involved.
This article, “Operating Agreements Today: The Foundation to Avoid Controversy Tomorrow,” is a valuable resource to lawyers working with LLCs looking to shift their focus to the probabilities when working with limited liability companies rather than simply fixating on the possibilities. The ability to be prepared for what is probable and reflecting as much in an Operating Agreement allows more protection to all members involved. For example, fights among the LLC’s own members are far more common than attacks from outside creditors.
On the importance of the written Operating Agreement, Williams concludes, “Paper is cheap and lawsuits are expensive.”