Voytas Law has drafted operating agreements for a wide array of Missouri businesses. We have litigated disputes between business owners arising out of these operating agreements. Our courtroom experience informs our document drafting, and we have been able to provide high-quality, tailored operating agreements that eliminate future litigation risk between business owners.
LLCs in Missouri are legally required to have an operating agreement. Mo. Rev. Stat. 347.081 states that the members of a LLC “shall” adopt an operating agreement. Unfortunately, as the practice series highlights, “[a]lthough the Act mandates that an LLC have an operating agreement, it does not contain a deadline for the adoption of an operating agreement and it does not specify any consequences of the failure of the members of an LLC to adopt an operating agreement.” § 32.6. Operating agreement, 1A Mo. Prac., Methods of Prac.: Transact. Guide § 32.6 (4th ed.).
Mo. Rev. Stat. 347.015 defines an operating agreement as “any valid agreement or agreements, written or oral, among all members.” Courts interpret LLC operating agreements according to the ordinary rules of contract law. Nicolazzi v. Bone, 564 S.W.3d 364, 370 (Mo. Ct. App. 2018).
There is one case primarily instructive on an oral operating agreement in Missouri. An individual was found not to be a member of an LLC (and therefore had no
ownership interest or rights) when a review of the record showed there was not the necessary “agreement as to material terms between the parties” to form an LLC and to constitute that he was a member by means of an oral operating agreement. Birkenmeier v. Keller Biomedical, LLC, 312 S.W.3d 380, 391 (Mo. Ct. App. 2010), overruled by Konopasek v. Konopasek, No. SC 99816, 2023 WL 4201660 (Mo. June 27, 2023).
Benefits of a written LLC agreement in Missouri
Missouri statute 347.081, set forth below in part, highlights what LLC operating agreements may contain: 347.081. Operating agreement, contents — policy statement — enforceability, remedies. — 1. The member or members of a limited liability company shall adopt an operating agreement containing such provisions as such member or members may deem appropriate, subject only to the provisions of sections 347.010 to 347.187 and other law. The operating agreement may contain any provision, not inconsistent with law, relating to the conduct of the business and affairs of the limited liability company, its rights and powers, and the rights, powers and duties of its members, managers, agents or employees,including:
(1) Whether the management of the limited liability company shall be vested in one or more members, managers or other persons, and, if so, the powers and authority to be exercised by such persons;
(2) Providing for classes or groups of members having various rights, powers and duties, and providing for the future creation of additional classes or groups of members having relative rights, powers and duties superior or equal to existing classes and groups of members;
(3) The exercise or division of management or voting rights among different classes or groups of members, managers or other persons on a per capita or other basis;
(4) With respect to any matter requiring a vote, approval or consent of members or managers, provisions relating to notice of the time, place or purpose of any meeting at which any matter is to be voted on, waiver of notice, action by consent without a meeting, quorum requirements, authorizations by proxy, or any other matter with respect to the exercise of any voting or approval rights;
(5) Authorizing all or certain persons to execute articles, notices or documents permitted or required by sections 347.010 to 347.187;
(6) Restrictions on the transfer of members’ interests in the limited liability company, and options or rights to acquire or sell members’ interests in the limited liability company;
(7) The manner in which income, gain, deduction, loss, credit and items there of are to be allocated to the members; and
(8) Provisions relating to any tax elections to be made by the limited liability company and the authorization of persons to make such elections.
2. It is the policy of sections 347.010 to 347.187 to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements.
3. The operating agreement shall be enforceable at law or in equity by any member to the extent provided in applicable law.
4. This section shall not affect any otherwise valid agreement among members of a limited liability company.
Without a clearly drafted operating agreement, the Court may have to determine the intent of the business owners if there is a dispute. This is not a financially desirable outcome for any business. Every Missouri LLC owner should procure a carefully drafted operating agreement after consulting with counsel. We are happy to help. Please contact Rick Voytas with questions or concerns.
