I'm starting a small business with two other people. One of them sent over an operating agreement he drafted himself. I've read it but I'm not sure what I'm missing. Is it worth paying for an attorney to review before I sign? I don't want to spend money unnecessarily but also don't want to get burned.
LLC Formation
Would you hire an attorney before signing an LLC agreement?
Yes. The operating agreement controls how you can be forced out, how distributions work, what happens if someone wants to leave. If the other person drafted it, they've thought about their own interests, not necessarily yours. Even a one-hour review can catch something.
I did it without one. Worked out fine. But that's just luck, probably. If I had to do it again I'd probably pay for a review.
Not a lawyer, but I worked in insurance claims for years. The number of partnerships that fell apart because no one clarified buyout terms is staggering. An attorney is cheap compared to a business divorce.
Exactly. And the person who drafted it might not be trying to screw you. They probably just copied something from the internet or used a template. But what's missing can be just as dangerous as what's in there.
Can you ask the other person to split the cost of a review? Makes it less awkward. If they refuse, that tells you something too.
How much are we talking? My attorney charged $400 for a basic operating agreement review. Worth every penny to me.
I didn't think about asking to split the cost. That might be the way to go. Thanks for the input, everyone. I'm leaning toward getting a review now.
I'd also ask the attorney to explain anything in plain English, not just hand you back a marked-up document. The value is in understanding it, not just having someone sign off.