Solving Disputes among LLC Partners
It is very important that every LLC have a LLC Operating Agreement. By having a LLC Operating Agreement, the members will be provided with a clear set of rules that all members have agreed upon greatly reducing the likelihood of disagreement between them in the future. A LLC Operating Agreement will also greatly reduce financial and management misunderstandings. Without an Operating Agreement, your LLC will be required to default to state law for important LLC decisions which could jeopardize your business.
LLCs are like marriages. Disputes may arise among the parties which need to be resolved. Most LLCs seek to resolve disputes among the members confidentially and with as little stress to the business relationship as possible. LLC agreements typically provide for arbitration of disputes through an arbitrator or for dispute settlement through a court of law.
Arbitration is thought to reduce a company’s expense and the potential strain of a trial. In addition, arbitration cases come to hearing faster and are shorter. However, the outcome of arbitration is solely based on the decision of an arbitrator and is not subject to appeal. In general, it is more common for disputes among the members to be settled by arbitration rather than by a court of law. Generally, if one will electing to settle disputes arising from the Operating Agreement by a “court of law”, it is common that the members agree to decline a jury trial, as a judge rather than a jury is thought to be more capable of understanding the technical legal issues that may arise with respect to the LLC Operating Agreement.
