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KEY ISSUES BUSINESS PARTNERS
SHOULD BE DISCUSSING DURING
Eric C. Perkins Esq.
T he Virginia
L imited L iability C ompa ny
The average business relationship
has a life span of 5 years; the
average startup small business today
has a life expectancy of 4 to 4.5
Cressy, Robert. "Small business failure: failure to fund or failure to learn." Entrepreneurship, Small & Medium-Sized
Enterprises and The Macroeconomy (1999): 161-185.
THE PROBLEM OF DOING
Risk of Litigation
Running a Race to the Bottom
THE BENEFITS OF PLANNING
Why are we forming this LLC?
Should the LLC be allowed to engage in any
lawful business, or should its purpose be
Who is contributing what to the LLC (e.g.,
cash, property, services, etc.)?
What should happen if the LLC needs more
capital in the future?
MANAGEMENT AND CONTROL
Who will control the decision-making process
on a day-to-day basis?
What sort of voting rights should apply for
major business decisions—majority, super-
majority, unanimous approval?
Do we want to adopt a particular officer
structure similar to a corporation?
How can managers/officers be removed?
Do we want to memorialize any special
compensation terms for an owner providing
services to the LLC?
Any special fees to owners or their affiliates?
How will cash available from business
operations or capital events (e.g., a sale of
assets or a refinance) be distributed?
How will profits and losses be allocated among
the owners for tax purposes?
What sort of transfer restrictions do we want to
impose on one another to preserve the
integrity of the ownership group?
Do we want include succession planning
provisions to address what happens upon the
death, disability, or retirement of an owner?
How do we want to handle the process of
dissolving and liquidating the business?
How do we want to resolve disagreements that
arise among owners?
Litigation, arbitration, mediation, negotiation?
Who will serve as registered agent of the LLC
and coordinate payment of State Corporation
Commission annual fees, etc.?