Legal Lessons Learned from Wishful Contracting (Part 2)

WHAT WE’VE LEARNED FROM WISHFUL CONTRACTING LLC

The legal lessons learned from Wishful Contracting LLC so far may require a bit of reading to get to the key lessons. Just to make sure we don’t miss them, let me review them quickly in a couple of lessons. (to read part 1, click here)

LLCs and UNANIMOUS DECISIONS.

It takes unanimous agreement by all partner-members to make changes to an LLC. Many LLC owners have found that when it is time to remove someone; they can’t. The other member must consent to be removed. Even if ten friends are all partner-members, they can’t vote out that one lazy member because standard LLC rules do not allow it.

LLC OPERATING AGREEMENT.

Some people see LLC Operating Agreements as mere formalities. They just pull one from the internet, everyone signs it, and then everyone ignores it.

Operating Agreements can completely change the rules under which an LLC operates. For instance, standard rules in a member-run LLC is that no member can be removed without the consent of all members, including the member being removed (except for certain statutory reasons). The Operating Agreement can change that.

Everyone signing it at the beginning means that unanimous agreement for whatever the OA permits is presumed. While, on one hand, it can allow removal of members not pulling their weight, it might also allow removal of an investor-member once the LLC has their money. Operating Agreements should not be signed casually because they have power.

SHOULD YOU EVER IGNORE THE LAWYER?

Sometimes lawyers can protect you right out of business. Sometimes the lawyer’s protection is meaningless because what the protect you from never happens.

It’s a judgment call.

It’s a judgment call with potential consequences because sometimes things do go wrong. Sometimes if you do what the lawyer told you to do, it can protect your business and save you from losing everything.

The importance of consulting with your lawyer first will at least let you make your call knowing the important variables involved. After all, you can’t make good decisions if you do not understand what’s at risk.