So my business partner and I got excited, filed the LLC, and now we're sitting down to actually write the operating agreement. We have no idea what we're doing. Any advice on what terms we absolutely need to nail down before we start making money? We're a 50/50 split if that matters.
LLC Formation
We formed the LLC first and are only now discussing the partnership terms
Yikes. 50/50 is a recipe for deadlock. You need a tiebreaker mechanism in there. What happens when you disagree? Someone has to have the final say or you need a mediator clause.
Not a lawyer, but I've been through this. Get a real attorney to draft it. The DIY templates online are garbage for 50/50 partnerships. You'll thank yourself later.
Honestly,just look up 'operating agreement template' and fill in the blanks. It's not rocket science unless you're doing something complicated.
That's terrible advice. You get what you pay for. A template won't cover capital contributions, profit distribution, or what happens if one of you wants out. Good luck enforcing a blank template in court.
moxie_grinder is right. Also, decide upfront how you'll handle disagreements that aren't deadlocks—like day-to-day stuff. Who has authority to sign contracts? What's the spending limit before you both need to approve?
Capital accounts. Please, for the love of all that is holy, spell out capital accounts clearly. I've seen so many partnerships blow up because one person put in more cash and they never documented it properly.
DaisyChain that's what a template does though. It has a section for capital contributions. You just fill it in.
A template gives you a line item. It doesn't give you the nuance of how to value sweat equity or what happens if someone stops contributing but still owns half. But sure, fill in the blank ngl.
This thread is making me glad I'm a solo founder. 😂
Also think about exit strategy. What if one of you dies? What if you hate each other in two years? Buy-sell provisions are key. And don't forget to fund life insurance to cover a buyout if needed.
All of this. And get it done before you start operating. Once money is flowing, everything gets ten times harder to negotiate.
Appreciate the input, everyone. We actually have a meeting with a lawyer next week, so we'll bring these points up. The 50/50 deadlock thing is definitely something we need to figure out. We're both pretty stubborn.
Good luck. Seriously. Being stubborn and 50/50 is like mixing bleach and ammonia—technically possible but probably going to end badly.