The Awful Agreement

By /


It’s an exciting moment. You’ve finally decided to do it. You and your friends are going to form a limited liability company and start your own business. You’ve put a lot of thought into this, crunched the numbers, and weighed the risks. It’s time.

Once that decision is made, delays become painful. You’re ready now.

Expenses become painful, too. If you’re lucky, you and your co-owners have saved up enough start-up funds to get through the first six to twelve months, or perhaps you have family members who are willing to back you. On the other hand, perhaps you’re bootstrapping your business off of credit card debt.

It’s really not a surprise that you don’t want to pay an attorney to draw up a limited liability company agreement. Let’s face it: legal services can be expensive. And we attorneys want to take the time to do things right for you; we’ll ask you to move at a more deliberate pace than you may want. So, you think, maybe you won’t use a lawyer this time. After all, there are those online services that can do “everything” for you. Or your buddy has a document you can use. Or a friend is an attorney, and she’ll whip something up for you for free.

BAM. The awful agreement. Just like that.

What do I mean by “awful agreement?” It’s simple: it’s an agreement that was put together for someone else to satisfy their particular requirements, not yours. It’s an agreement that’s going to fail you later because it doesn’t do what you want it to do. Those agreements from online services? They cover all of the statutory basics, but because they are form-driven they fail to provide language to protect your interests or to achieve your goals. That agreement that someone else had for another company? Same thing; it was great for that company, but your circumstances and needs are different.

If you are thinking about starting a new business, please reach out to us before you sign an awful agreement so that we can help you assess your priorities and draft a document that truly meets your needs. And if you’ve already signed that agreement, don’t panic; if you’re not at a place of active disagreement among the members, we can help you fix your agreement. Please contact us so that we can assess your options and suggest some amendments that will better meet your needs.


About the Authors

Andrew Clapp

Andy’s practice spans business, finance, securities and real estate law. Andy advises companies throughout the entire life cycle of the company – from formation, early-round fund raising, corporate governance, operations and management, to merger, sale or succession.

Learn More