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Limited Liability Company (LLC) Contract Terms Operating Agreements

Venable LLP

Despite Chancery Court Decisions in Recent Years, Agreements Continue to Include Transfer Restrictions That May Not Be Enforceable

Venable LLP on

Despite recent decisions by the Delaware Court of Chancery, many key corporate documents continue to include restrictions on indirect transfers of equity that may not be enforced if challenged in court....more

Farrell Fritz, P.C.

New Year, New Law – New Opacity – for LLC Owner Disputes

Farrell Fritz, P.C. on

New York’s appellate courts are breaking new ground in 2025. Until a month ago, I would have said that “deadlock” most certainly is not enough on its own to dissolve a New York LLC....more

DarrowEverett LLP

LLC's Failure to Execute Operating Agreement Opens Legal Trapdoor

DarrowEverett LLP on

While entity distinctness is a bedrock principle of corporate law, it may often appear redundant and unnecessary for a limited liability company (“LLC”) to sign its own operating agreement. That was likely the thinking of the...more

Farrell Fritz, P.C.

Is an LLC Bound by its Own Operating Agreement?

Farrell Fritz, P.C. on

Is a limited liability company a party to and bound by its own operating agreement? Many folks would say, “Yes, of course.” But it turns out the answer varies depending upon the law of the company’s state of...more

Lathrop GPM

Delaware Case Examines Amendment-by-Merger Provision of LLC Act

Lathrop GPM on

On  August 30, 2024, the Delaware Court of Chancery issued an opinion in Campus Eye Management Holdings, LLC v. DiDonato, dismissing a challenge to a merger effecting an amendment to the limited liability company agreement of...more

Farrell Fritz, P.C.

Did Chancery Court Just Crack Open the Door to Equitable Dissolution of LLCs?

Farrell Fritz, P.C. on

Delaware Chancery Court’s contractarian approach to all things LLC, embedded statutorily in Section 18-1101(b) of the Delaware LLC Act (“It is the policy of this chapter to give the maximum effect to the principle of freedom...more

Farrell Fritz, P.C.

Crossing the Hudson: Recent Business Divorce Decisions from Yonder States

Farrell Fritz, P.C. on

Folks who’ve been following this blog for years know that periodically I like to venture beyond New York’s borders to find and report on interesting decisions from other states in business divorce cases....more

Farrell Fritz, P.C.

New York Appellate Court’s Split Decision Involving Delaware LLC Pits “Harsh” Contractarianism Against “Fundamental Fairness”

Farrell Fritz, P.C. on

Last week, the Manhattan-based Appellate Division, First Department, handed down one of the more intriguing decisions by a New York court I’ve seen in a long time involving a dispute between LLC members....more

Winstead PC

Entity Formation as a Process: The Strategic Importance of Carefully Drafting Limited Liability Company Agreements Before Forming...

Winstead PC on

From early-stage startups to seasoned enterprises, businesses eventually form at least one legal entity to carry out their operations. Down the road, as opportunities arise for a business to expand, acquire others, merge, or...more

Farrell Fritz, P.C.

Dissolution Defined: The First Department’s Recent Guidance on Interpreting Operating Agreements

Farrell Fritz, P.C. on

The owners’ agreement is the backbone of the closely-held business.  In intracompany LLC disputes, few things are more important than what the operating agreement has to say on the subject.  As a consequence, the pages of...more

Farrell Fritz, P.C.

Scrivener’s Error Keeps Sailboat-Owning LLC Afloat

Farrell Fritz, P.C. on

The members of Nite Cap’s owner, Bull-Poet, LLC, recently traded the full sheets and gentle seas of the Hudson for the strum and drang of litigation in New York’s Supreme Court.  But the squall has passed; thanks to New York...more

Farrell Fritz, P.C.

And a Time to Every Purpose Under . . . the Operating Agreement?

Farrell Fritz, P.C. on

It’s a bit of a stretch to suggest that King Solomon prophesied the standard for judicial dissolution of LLCs, but there it is: under New York’s judicially construed standard for involuntary dissolution under Section 702 of...more

Farrell Fritz, P.C.

The Contract is King: Advancement and Indemnification Under Delaware Law

Farrell Fritz, P.C. on

In last week’s New York Business Divorce, we wrote about an important decision from New York’s highest court, Sage Sys., Inc. v Liss (___ NY3d ___, 2022 NY Slip Op 05918 [Ct App Oct. 20, 2022]). In Sage, the Court of Appeals...more

Farrell Fritz, P.C.

Warning: If You Want Legal Fee Advancement or Indemnification, You May Need to Amend Your Partnership, Shareholder, or Operating...

Farrell Fritz, P.C. on

The universe works in mysterious ways. Four days ago, when I sat down to write this article, my plan was to feature a decision from Manhattan Commercial Division Justice Andrea J. Masley denying dismissal of a closely-held...more

Farrell Fritz, P.C.

Magic Words Still Matter, and Equitable Defenses Can’t Save a “Void” Transfer

Farrell Fritz, P.C. on

New York’s default rules regarding LLC members’ rights to transfer their interests appear in sections 603 and 604 of the LLC Law. Section 603 provides that a membership interest is fully assignable, but the assignee does not...more

Fox Rothschild LLP

A Member of a Delaware LLC Can Withdraw Their Membership by Implied Agreement

Fox Rothschild LLP on

The Court of Chancery recently concluded that a member of a Delaware LLC could reach an implied contractual agreement to withdraw as a member of the LLC, even if the LLC does not have a written operating agreement....more

Hicks Johnson

The Importance of “Plain and Unambiguous Language” When Eliminating Fiduciary Duties in Delaware

Hicks Johnson on

The Delaware Limited Liability Company Act allows for the fiduciary duties of a member to be expanded, restricted, or eliminated by provisions in the operating agreement of a limited liability company (“LLC”). If drafters...more

Patton Sullivan Brodehl LLP

Does an Operating Agreement’s Arbitration Clause Apply to a “Purported” LLC Member?

If an LLC’s Operating Agreement contains a sufficiently broad arbitration clause, most disputes raised by the LLC’s members relating to the LLC will be sent to arbitration (instead of the court system) for resolution. But...more

Farrell Fritz, P.C.

Anti-Dissolution Provisions and Public Policy

Farrell Fritz, P.C. on

In Congel v Malfitano, New York’s highest court wrote that business partners are free to include in partnership contracts practically “any agreement they wish,” including about “the means by which a partnership will dissolve,...more

Bradley Arant Boult Cummings LLP

Avoiding the Pitfalls of Assigning an Interest in an LLC

One of the goals in a business divorce is finality – ending a business relationship once and for all. But what if the end isn’t really the end?...more

Farrell Fritz, P.C.

The Operating Agreement Controls, Unless Public Policy Says Otherwise

Farrell Fritz, P.C. on

Two principles often guide courts’ interpretation and enforcement of contracts.  First, courts respect parties’ freedom of contract, mostly.  So long as an agreement is not illegal or violative of a strong public policy,...more

Farrell Fritz, P.C.

A Two-Act Play of LLC Default Rules and Manager Removal

Farrell Fritz, P.C. on

“Except as provided in the operating agreement. . . ” - By my count, this phrase and its close relative, “unless otherwise provided in the operating agreement,” appear 59 times in New York’s LLC Law, most often to...more

Farrell Fritz, P.C.

Disguised Agreements and Dissolution

Farrell Fritz, P.C. on

Appearances can be deceiving. - That, essentially, was the argument made in two recently decided cases involving claims for judicial dissolution. ...more

Farrell Fritz, P.C.

Cooked or Raw? Enforceability of Partly Signed Operating Agreements

Farrell Fritz, P.C. on

The harried realities of modern life are such that business entity organizational documents, like LLC operating agreements, sometimes do not get drafted or executed until long after the entity’s initial formation with the...more

Farrell Fritz, P.C.

Too Little, Too Late: Court Sides with Ousted Member, but Denies Preliminary Injunction Undoing Termination

Farrell Fritz, P.C. on

We often cover preliminary injunctions on the pages of this blog because they are a powerful tool in the business divorce litigator’s toolbox: they force court action early in the case, they can protect rights that are...more

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