Q: Business operating agreement
If an LLC company is formed between two partners/members with 10/90% shares. Can an operating agreement change these shares to 49/51%. The goal is to acquire a franchise business. The franchisor is asking that the operating partner must hold more than 51% of the company shares, while my partner holds just 10%, while she will manage the full operation of this new potential business. Is the operating agreement able to set actual shares and responsibilities while the LLC certificate is 51/49%? Is that legal and workable? Thank you.
A: Hi there, this can and does happen. There are some mechanisms through which you can amend these percentages. You also need to consider if the business is generating any revenue/what assets it owns to avoid any unintended tax consequences. Please reach out if you would like to discuss further.
A:
You should have an attorney take a look at the agreement or forms the franchisor has provided. The definition of "operating partner" in those documents would shed light on the potential path(s) forward. With respect to the Operating Agreement, multi-member LLC Operating Agreements often contain "buy-sell" provisions that define the manner in which member interests can be purchased and sold.
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