The three questions your operating agreement probably doesn't answer

Serious disputes rarely start with bad faith. They start with a document that was quiet on the one question that ended up mattering.

Here are the three that come up most.

What happens when someone wants out

Almost every template says an interest can be transferred with consent. Very few say what happens when a member wants to leave and the others don't want to buy.

Without a mechanism, you get a stalemate: someone who wants out and can't get out, still holding rights, still receiving allocations, increasingly unhappy.

Look for: a buyout right, a valuation method, and a payment schedule. If your agreement doesn't set out how a departing member's interest is valued, that's the gap.

What happens on death, divorce, or bankruptcy

If a member dies, does the interest pass to their estate? Can heirs vote, or only receive distributions? If a member divorces, can a spouse end up holding part of your company? If a member goes bankrupt, what can a trustee reach?

Templates typically go quiet here. These aren't unlikely events over a business's life.

What happens in a deadlock

Two members, fifty-fifty, and they disagree. What happens?

Without a mechanism, the answer is often litigation, because nothing in the document breaks the tie. Options exist — a tiebreaker, mediation, a buy-sell trigger — but they have to be written in advance.

How to check yours

Search your operating agreement for: valuation, buyout, deadlock, death, divorce, and transfer. If a term doesn't appear, it isn't addressed.

Why now rather than later

Amending an operating agreement while everyone agrees is a short document and a signature.

Doing it once there's a dispute is impossible, because nobody will agree to a mechanism that

disadvantages them in the fight they're already having.

What to do

Read your agreement with those three questions in mind. If it's silent on any of them and you have partners, fix it while the fixing is easy.

This is general information, not legal advice for your situation. If you want an answer for your business, book a consultation.