Two-member LLCs can operate smoothly for years, but a 50/50 disagreement can paralyze the business if the operating agreement has no tie-breaker or exit mechanism. The agreement should be designed before the conflict exists.
Record ownership and contributions
State each member's percentage, initial contributions, future funding obligations, and whether additional contributions change ownership. Do not assume the state default rules reflect the deal the members made.
Define authority and major decisions
Specify who can sign contracts, open accounts, hire employees, borrow money, or sell major assets. Identify which decisions require both members' approval.
Plan for deadlock and departure
A mediation process, buy-sell mechanism, valuation method, payment schedule, and rules for death, disability, or a member's desire to leave can keep a disagreement from becoming a lawsuit.
Tax and distribution provisions need to match reality
Cover allocations, distributions, tax responsibilities, records, and the treatment of retained cash. The agreement should be coordinated with the LLC's tax election and operating practices.