So my business partner and I had a falling out over profit splits and who gets to make decisions. We never really updated our operating agreement after we first formed the LLC, it was basically a template we found online. Now he's claiming he has more say because he put in more capital, and I'm stuck wondering if our old agreement even holds water. Anyone been through this? I thought the operating agreement was just a formality.
LLC Disputes
I didn't know an llc operating agreement could matter so much when there's a dispute
Oof. Yeah, the operating agreement is basically the rulebook for your LLC. If it's vague or outdated, a court will likely interpret it—or fall back on state default rules, which might not favor you. Get a lawyer to look at it ASAP.
Template agreements are a trap. I used one for my first LLC and it had a clause about dissolution that screwed me over when my partner wanted out. Cost me $5k in legal fees to untangle.
That's what I'm afraid of. Did the lawyer say the template was invalid or just that it didn't cover the dispute?
Both. It was missing key stuff like buyout terms and deadlock resolution. The court ended up applying the state's default LLC act, which wasn't what either of us expected. Expensive lesson.
Not a lawyer but I've seen this play out. If your agreement doesn't specify how decisions are made, your partner might argue 'proportional to capital contributions' is the default. But that's not always true—dpends on your state. You need to read the exact language in your agreement.
lol @ 'just a formality'. The operating agreement is the whole ballgame. Good luck.
My two cents: even if the agreement is old, it might still be enforceable. But if it's silent on profit splits and decision-making, a judge could imply terms based on conduct—like how you've actually been operating. So gather emails, text messages, anything showing how you've splIt profits or made decisions in the past. That could help Your case.
Also, check if your state requires an operating agreement to be in wrting. Some states enforce oral agreements, but it's a mess to prove. If yours is written but outdated, a court might still use it as a starting point and then fill gaps with default rules.
Appreciate the responses. I'm going to dig up our old agreement and see what it actually says about decision-making. Sounds like I might need a lawyer regardless.
Do it. And don't wait—if your partner lawyered up first, you're already behind. Been there.