What the missing agreement changes
Without an operating agreement, the LLC is governed by the default rules of the state where it was formed, and those defaults may not match what the members assumed. In New York, for example, default rules allocate profits according to the value of each member's contributions rather than splitting them equally. New York's LLC law also expects members to adopt a written operating agreement shortly after formation, and banks, lenders, and investors often ask for one. Questions such as how a member leaves, what happens when a member dies, and who can sign contracts are often unanswered by defaults or answered in ways that cause friction. Single-member LLCs benefit too, since a written agreement can support the separation between owner and company and plan for succession.
Information to collect
Gather the articles of organization, the filing receipt, and records of New York's separate publication requirement, since failing to complete it can suspend the LLC's authority to do business in the state. List each member, what each contributed in money, property, or services, and when. Collect tax returns and K-1 forms, which show how profits have been reported, because these often reveal what the members actually understood. Bank resolutions, contracts signed on the LLC's behalf, and any emails about ownership percentages help establish the existing arrangement. If the LLC was formed in another state, such as Delaware, that state's default rules apply instead, and some of them differ from New York's.
Putting an agreement in place now
Most of the time, the fix is to adopt an operating agreement now that reflects how the members have actually operated, and it can often ratify past actions. We go through ownership, management, distributions, transfer restrictions, buyout terms, and what happens on death, disability, or departure. If members disagree about percentages or roles, that disagreement is better resolved now than in a later dispute. Tax classification and allocations should be coordinated with your accountant. Where a dispute has already begun, the default rules become the starting point, and we look at which ones apply and what they mean for your position.
