Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.
Good evening. Are you trying to protect your interests with respect to the other 49% or with respect to your husband in the event of a divorce? Or, both?
Both. Another primary consideration is for me to be able to take over the company if my husband wishes to pull out for any reason or wishes to stop acting in the management role or pre-deceases me. We want to be able to keep his 51% managing membership role and equity stake in the family (the 3 other equity members are not family). In the unlikely event of a divorce, how would I receive any compensation for services rendered in a scenario where the company becomes profitable and makes end of year distributions?
Do we have to split up his 51% equity between us on the operating agreement, or is there some way it can be stipulated to belong to both of us (similar to the way a house deed works)?
Thanks. First, you want to have an employment agreement providing for compensation for you for the work that you do. If you are not going to get paid in cash, then you need to be paid in ownership like everyone else...which would then dilute everyone's interests....the 51% owned by your husband and the 49% owned by the others. Second, to protect yourself against death, divorce or if your husband wants to leave the business....you want the Operating Agreement to provide that in the event of any your husband's death or if he wants to leave the business, you have the right to purchase your husband's interest for $1. In the event of divorce, the Operating Agreement should provide that the 51% interest will be divided equally between the two of you in the divorce settlement or as otherwise agreed upon.
Thank you somuch for allowing me to help you with your questions. I've done my best to provide information whichwill be helpful to you. If I have notfully addressed your questions or if you have any follow up questions, or if Ihave misinterpreted your questions in any way, please do not rate me yet, but simply ask a follow up question without rating soI can provide you with a fully satisfactory answer. If I have fully answered yourquestion(s) to your satisfaction, I would appreciate you rating my service with 3, 4, or 5faces/stars so I can receive credit for helping you today. I thank you in advance for taking the time toprovide me a positive rating!
Thank you so much for the positive rating! I appreciate having had the opportunity to serveyou! If I can be of assistance to you inthe future, just look me up and I will be happy to help!
I have a couple more questions regarding the operating agreement. How do I continue working with you?
Also, do you provide general legal reviews for operating agreements or know of someone who does?
You can simply ask for me at any time and I will be happy to help.... "SeekingtoRenderAid"
I'm not allowed under my terms of service to provide direct representation to you, but I would be happy to help you with any particular provision of your operating agreement. It's pretty important to get the Operating Agreement in good order before this gets going while everyone is happy because these businesses are like relationships...if you don't get the agreement resolved now, it gets really ugly when everyone is no longer happy. :)
I can also tell you the most critical things you want to make sure you address in your Operating Agreement:
1) Initial Contributions
2) Additional Contributions, if necessary
3) With regard to (2), are they required or optional; if made, are they treated as loans with a preference or as contributions which change ownership?
4) How are profits and losses allocated?
5) How and when are distributions to be made?
6) How is the LLC managed? Vote required for operating decisions? For major decisions?
7) Compensation to owners for working? Limitations on other compensation to owners and affiliates to keep anyone from re-directing money
8) limits on competition; Non-disclosure of trade secrets
9) What happens on death, divorce, or if someone wants out? How to value interests?
10) Rights of first refusal regarding sale of ownership interests and/or sale of business.
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).