LLCs are easy to get and very popular in franchising.

Despite LLCs being quick to set up you want to get them right at the outset and your operating agreement is the central piece to focus on.

For your LLC operating agreement drafting you should outline the following things in advance of giving it to your attorney to draft.

If your attorney is the LLC’s attorney there is not a need to incur the added cost of an attorney for each member and of course each member can get advice from their attorney and/or CPA.

Focus on the big stuff for your outline.

  1. Members’ roles & responsibilities
  2. Ownership breakdown
  3. How distributions will be made
  4. Decision making process & voting
  5. Breakup & member exists 

On number 5 you may want to consider a Shotgun Cause in your operating agreement or shareholder’s agreement in either an LLC or corporate entity.

My thinking is that Shotgun Clauses avoid a lot of drama and associated expense in the event of member disputes and they can even prevent disputes from escalating since all the members know in advance how things will turn out with a pre-scripted and managed sale.

Here is one description to get an idea about this – Shotgun Clause

This is not uncomplicated, nor a first timer DIY project but rather a do it together with your partners and experienced drafting help to achieve durable a result.

PS Need some more direction on this drop us line.

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