Multi-member LLCs are different. The drafting has to be.

Why multi-member LLCs are different

A single-member operating agreement is largely a formality — you can't really negotiate with yourself. A multi-member operating agreement is the document that decides every consequential question your business will ever face: capital, voting, profits, transfers, what happens when a member dies, divorces, or wants out.

We see those questions land in litigation regularly. The cause is usually the same: a multi-member operating agreement that nobody read carefully, drafted by a template service that didn't ask the right questions, signed years before the actual dispute showed up.

What you and your partners need to decide before forming

The discovery call walks through these. Coming in with rough answers makes the engagement smoother:

Capital structure

Who's contributing what — cash, services, IP, equipment? When? Are contributions equal or weighted? Are there commitments to future capital calls?

Profit and loss allocation

Pro-rata to ownership? Different from ownership? Special allocations for capital contributions or guaranteed payments? Tax classification (default partnership, S-corp election, C-corp election)?

Management

Member-managed (everyone runs it) or manager-managed (designated manager)? Voting thresholds for ordinary decisions vs. major decisions? Who can bind the company on contracts?

Transfer restrictions

Can a member sell their interest? To whom? With what consent? Right of first refusal for the other members? What happens on death, divorce, bankruptcy, or retirement?

Exit and dispute

How does someone get out? What's the valuation methodology? Is there a buy-sell trigger for the Five Ds (death, disability, divorce, departure, deadlock)? How do members resolve disputes — mediation, arbitration, dissolution?

What goes wrong without proper documents

Three patterns we see most often when an LLC was formed with a template:

No buy-sell trigger. A member dies, and their interest passes to a spouse who has no role in the business and doesn't want one. Or a member divorces, and their interest is now jointly owned with an ex-spouse. Or a member wants out, and there's no mechanism to value or buy the interest.

Vague or missing voting structure. Members deadlock on a major decision. The agreement says nothing useful about how to break the tie. The matter ends in judicial dissolution under Cal. Corp. Code §17707.03.

Generic transfer restrictions. A member sells to an outside buyer the other members didn't approve. The agreement either doesn't restrict transfers or has restrictions that don't actually trigger. The other members are now in business with someone they didn't choose.

Joint representation and Cal RPC 1.7

Multi-member LLC formation involves more than one client — typically the members jointly forming the entity. California Rule of Professional Conduct 1.7 governs joint representation: we screen for conflicts before drafting begins, disclose the joint-representation arrangement in writing, and obtain informed written consent from each member.

If a real conflict exists between members at the formation stage (one wants control terms the other won't agree to, one has materially different capital expectations, one wants protections the other won't provide), we'll surface that on the call rather than draft an agreement that papers over the conflict. Sometimes the right answer is for one member to retain separate counsel for the formation.

For existing multi-member LLCs

If you already have a multi-member LLC and the operating agreement is template-grade, we offer two paths:

Operating Agreement Review (S2, $495). 60-minute review, written memo identifying issues, recommendation memo. Direct-checkout eligible. The right starting point if you want to know whether the existing OA is workable before spending more.

Standalone Operating Agreement (S1, $1,495). Replacing a template OA with a California-specific custom OA. Discovery-call gated for multi-member matters.

If the operating agreement also lacks buy-sell provisions, the better path is often the Governance Restatement (B3, $4,495) — a full restatement integrating buy-sell, valuation, and tax-aware structuring.