Forced Capital Contributions

Unless periodic capital contributions are part of the deal, I now recommend LLC Operating Agreement provisions stating no further capital contributions are expected or required. Such a provision gives LLC owner/members an advantage against creditor arguments that LLC owner/members have a continuing duty to contribute additional capital to the LLC to pay LLC debts and liabilities.

I draft this LLC Operating Agreement provision myself and it is different than the related operating agreement language I used when I organized “Form” LLCs.

This is another area where an LLC Operating Agreement expanded in scope offers clients extra value and protection (see Options and Choices).

“[A]t the bottom of all private relations, however tempered by sympathy and all the social feelings, is a justified self-preference. If a man is on a plank in the deep sea which will only float one, and a stranger lays hold of it, he will thrust him off if he can.” Oliver Wendell Holmes, The Common Law (Boston: Little, Brown and Company, 1881), p. 44.