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JerrySJD
JerrySJD, Attorney
Category: Business Law
Satisfied Customers: 821
Experience:  Attorney for business formation, business sales, tax, partnerships, sole proprietors and buy/sell agreements.
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I am looking to beef up the wording in my LLCs record book.

Customer Question

I am looking to beef up the wording in my LLC's record book. (I am a 80% owner in that LLC)

I am looking to add some wording to a schedule which deals with decision making. I would like to add wording that states that 80% majority is needed to do the following:

Make final decisions regarding contracts with clients
Make final decisions regarding threats of legal action
Make final decisions on how members / managers can be compelled to complete tasks on behalf of the LLC.
Can request and a member / manager be compelled to stop communicating on behalf of the LLC.
Make final decisions regarding fault / liability of a member / manager who does actions against the profitability of the LLC

Can you please provide the best ways in which to word these items? Thank you!
Submitted: 4 years ago.
Category: Business Law
Expert:  JerrySJD replied 4 years ago.

JerrySJD :

This is a tough one, but there is a solution. First of all, what ever you put in the minute book will have little effect on outsiders or insiders. For the other memebers, if you want these protections, they must go into the Operating Agreement and be signed by all members. The Operating Agreement in an LLC is the governing document. It is much different than a corporation, where everything is done by minutes. Which brings us to the next point.


 

JerrySJD :

LLC's are like partnerships with liability protection. That means that third parties can be bound by any member. Even if you change the OA, a thrid party contract signed by a member will still be good against the LLC. You may have a cause of action against the other memeber, but you still have the problem with the thrid party. In the operating agreement, you should also add a hold harmless clause stating that any memeber who fails to abide by ther terms of the OA, as stated herein, shall hold the LLC and all members harmless for any damages that occur as a result of violating the terms of the OA. This poison pill should chill their desire to run out and do things without your consent.


 

JerrySJD :

What you might consider is being a corporation instead of an LLC. Then the other people could be officers with limited powers. Any contract would require an Incumbancy Certificate stating that the officer has the authority to do whatever they are doing. Also, then you would be operating with a minute book, minutes and other docuemtns in a much more formal way. In may ways the LLC revolution has hurt businesses by eliminating the need for the formalities that you rightly seek. Up to you, but if you stick with the LLC, it is the OA that you need to change and the others have to sign and agree. Then they will be on notice of the consequences of failing to abid ebey the terms of the LLC.


 

JerrySJD :

that is abide, not abid.


 

JerrySJD :

Thank you for using JustAnswer, please click "Accept". If you need more, just let me know.


 

JerrySJD :

The wording you already have in your question. I would, however, add a hold hamrless provision to beef up what you are doing. They have to realize they they will be left holding the bag if hey mess around.


 

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Customer: replied 4 years ago.
Thank for you the excellent explanation!
Customer: replied 4 years ago.
If I were to put these items in the operating agreement, how would they be worded. The document I am speaking about above is title the "Company Agreement", does that work as an operating agreement (we don't formally have one).

Expert:  JerrySJD replied 4 years ago.

If the Company Agreement states how profits and losses are split up and who owns what percentage, then that is the Operating Agreement. As a Q&A site, we are not supposed to draft specific language for you. However, you can find lots of Hold Harmless language if you check around a little. It is a commonly used provision in many contracts.

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Customer: replied 4 years ago.
Ok that makes sense, so the general terminology is called "Hold Harmless?"
Customer: replied 4 years ago.
I forgot to ask one additional question which may seem simple but I am unsure. My OA is multiple pages, with signatures at the end. How do you ensure the document is not tampered with, pages changed / edited, etc. Thank you!
Expert:  JerrySJD replied 4 years ago.

Excellent question. Typically, you have each member initial each page and sign at the end.

Customer: replied 4 years ago.
I have one LLC that the operating agreement is signed at the end and the steal in imprinted on each page. Is that generally enough until I can get all the pages initialed?
Expert:  JerrySJD replied 4 years ago.

yes

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