Operating Agreement

1Every allocation, distribution and dissolution dollar flows through a percentage that does not exist yet.

2Control does not ride on it, so this is a pure economics conversation: the easier kind, but it has to happen first.

A 50/50 split is simple but makes the deadlock article load-bearing. A weighted split prices contributions now and argues less later. Option C starts equal and lets a changed contribution be bought at appraised value.

Whatever the percentage, distributions are a Reserved Matter: either Member can block the other’s cash. Between people who trust each other that is an honesty mechanism; between people who do not, it is a weapon.

1Concentrated authority is the honest structure for how this company will run. Below the contract threshold and outside the Reserved Matters, the Manager acts alone and the company is bound.

The non-managing Member is protected three ways: Reserved Matters need both signatures, a service-standard carve-out walls off the Principal’s domain, and both Members see every account.

The blank thresholds are not formalities. They are the actual boundary of unilateral power.

The list covers the right things: debt, dilution, distributions, the brand, the agreement itself, litigation, and any service line that changes licensing exposure. A companion clause puts the loss from an unauthorized act on the Manager personally.

1Two open items: the thresholds are blank, and third-party notice language is missing. A Reserved Matters list binds the Members without automatically binding the outside world.

1The Principal cannot remove the Manager over a disagreement, only for Cause or through the Article 12 exit. Banking, insurance and vendor relationships sit on the Manager seat; an unstable seat is a company problem.

2So the structure holds only if Article 12 is usable: a protected seat with a working exit is defensible; without one, it is entrenchment.

For counsel, both ways: Cause covers any dishonesty conviction, with no felony threshold, materiality test or link to the Company.

1California voids post-relationship restraints on working and soliciting except in narrow statutory situations. A two-year client non-solicit, standing alone, tends to be struck rather than narrowed there.

2The employee prong is on especially thin ice after recent case law.

The defensible structure is the one the attorney note names: attach the restraint to the buyout of the membership interest under the sale-of-business exception. A structural change, not a wording change, and it belongs before signature.

1A rename at every ownership change would sink the company, and the draft’s answer is coherent: the company keeps the brand, her buyout includes its going-concern value, an indemnity covers later liabilities under her name, and she can use her own name for anything non-competing.

2The unbuilt piece is insolvency: reversion comes after creditors are paid, so creditors of a failed company could auction the name. A defeasible title or springing reversion takes it out of the estate first.

Three structures route their failure mode here: the mutual veto on distributions, the protected Manager seat and any 50/50 ownership outcome. If this article does not work, none of them do.

1A shotgun clause between parties of unequal liquidity is a forced sale dressed as symmetry, as the draft’s own note says. The appraised-value route, with a jointly selected appraiser, no discounts and shared cost, stays fair whoever has cash that year. Choose it and close the bracket.

1Twenty percent down with the balance over two years at the federal rate is a common small-company structure, but the person leaving carries the remaining company’s credit risk for two years.

2Securing the note with a pledge of the transferred interest is the minimum protection and should not stay a bracket. Acceleration on missed payments and on any sale of the company should also be considered.

Excluding minority and marketability discounts is the pro-fairness position in a two-member company. Binding appraisal with shared cost avoids dueling experts, and home-county arbitration with an injunctive carve-out is a proportionate forum for a company this size.

1Housekeeping: spousal consents matter in a community-property state, and the access-credential schedule should be populated before signing.

1The draft is correctly marked unsignable. None of the open values is cosmetic; several are the operative boundary of a whole article.

The practical risk is timing. If the company starts operating before the agreement is executed, default state law governs in the meantime.