Options and Choices for LLC Clients Are Important

In my opinion the most common and costly mistakes of LLC organization and especially in Form LLCs are 1) omitting areas of coverage in LLC Operating Agreements and 2) not having LLC owner/members consider options and choices for their LLCs. This firm stresses LLC options and LLC owner/member involvement and education in every LLC Package.

Involving LLC clients in the actual structuring of their LLCs benefits them in at least the following ways:

1) LLC asset and liability protection from education – When LLC clients consider LLC options and the potential scope of their LLC Operating Agreements they are being educated about LLC structure and LLC law, and understanding LLC law and structure is their best defense against future mistakes in LLC operation that undermine LLC asset and liability protection (LLC organization is probably the only time short of an LLC crisis when LLC clients are inspired enough to think about LLC law and structure - having to consider choices for their LLCs takes advantage of this opportunity);

2) Business planning - Considering any LLC option or choices is an exercise in business planning and there is never enough business planning (see Specific Business Provisions Included in LLC Operating Agreement and review the titles of the other links below Single Member LLCs and Multi-Member LLCs to see what I mean);

3) Predictability - Most of the LLC options and choices offered by this firm address potential LLC problems which if planned for in advance usually will have predictable future outcomes thereby protecting LLC owner/member expectations; and

4) Minority LLC owner/member protection – Minority LLC owner/members in multi-member LLCs have greater power to modify LLC Operating Agreements (and thus the business or investment plan) during LLC organization then before the LLC operating agreement has been executed when it will take a majority, super majority, or unanimity of LLC owner/members for a change.

This firm first sends LLC clients Pre-Organization Questionnaire Letter questioning them about their preferences concerning the LLC options and choices. Then, with the first draft of the LLC operating agreement clients receive an Attorney Letter on Doing Businesses as an LLC to be read before they review the proposed LLC operating agreement.

This process has LLC clients considering LLC options and choices and requires them to spend some time in the process. The LLC Operating Agreements then are drafted to fit the clients’ choices. “Form” LLCs by definition do not present many choices because they rely on pre-drafted “form” LLC operating agreements which regardless of how well they are thought out must still be generic enough to fit a multitude of LLCs. (See Why “Form” LLCs are Used and Not Modified.)

This firm’s LLC options and choices are individually described in the Single Member LLCs and Multi-Member LLCs sections.