"Form" LLCs Are Everywhere

Ninety (90%) percent of the LLC operating agreements I have reviewed in actual use in South Carolina which were not drafted by this firm used pre-drafted “form” LLC operating agreements and I could identify the “form” book from which they were taken. I believe clients accept “form” LLCs because 1) they do not realize there is a choice, much less a cost competitive choice (see Fees and Costs) and 2) they mistakenly think all LLCs have the same scope, same contents, and offer the same level of asset and liability protections.

The following links also address “form” LLCs:
Why “Form” LLCs are Used and Not Modified
Options and Choices for LLC Clients Are Important

Based on my observations, “form” LLCs do not offer LLC clients enough:

1) Flexibility - South Carolina LLC law authorizes LLC Operating Agreements to include essentially any provision desired by LLC clients or recommended by their attorneys, yet few of the organizational/business options and choices available to LLCs are included in the pre-drafted “form” LLCs operating agreements (see Options and Choices for LLC Clients Are Important). Thus, numerous LLC options and choices are not given to LLC clients because to do so would require modification of the “form” LLC operating agreement and as described in Why “Form” LLCs are Used and Not Modified that usually does not happen.

2) Asset and liability protection (asset and liability protection being the single overriding reason LLCs are recommended) - The popular pre-drafted “form” LLC operating agreements I have seen do not include numerous asset and liability protection features available to LLCs (and offered in the firm’s LLC Package). As stated above, the pre-drafted “form” LLC operating agreements are rarely modified so these asset and liability protections do make it into clients' LLCs (see Why “Form” LLCs are Used and Not Modified);

3) Education – During LLC organization is the best and maybe the only opportunity to educated LLC clients about LLC law and LLC operation. However, because the “form” LLC process as I have seen it is streamlined, “form” LLC organization has less client involvement (fewer LLC options and choices to consider), and thus the “form” LLC process offers fewer educational opportunities to clients (see Options and Choices for LLC Clients Are Important); and

4) Advice, tools, and direction for future LLC operation - “form” LLCs I have seen basically consist of a discussion between attorney and client on the advantages of LLCs, a filed LLC articles of organization, and the delivery to the LLC client of a pre-drafted “form” LLC operating agreement. This firm’s LLC Package includes written advice and legal documents in addition to the LLC operating agreement to assist with future LLC operation.

In my opinion, omitting areas of coverage in LLC operating agreements and not having LLC owner/members consider and implement options and choices for their LLCs and their LLC operating agreements are the two most common and costly mistakes of “form” LLC organization. This firm stresses both LLC options and LLC owner/member involvement and education in every LLC Package. We can do so because we do not fit LLCs into pre-drafted “form” LLC operating agreements but attempt to fit LLC operating agreements to LLC clients.