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Most entrepreneurs who form an LLC treat the operating agreement as paperwork — something to sign, file, and forget. In California, that approach is a trap. The California Revised Uniform Limited Liability Company Act (RULLCA) imposes default rules that govern your LLC’s operations unless your operating agreement expressly overrides them. One of those default rules — the unanimous consent requirement — can paralyze your company at exactly the moment you need to move fast.
What the Unanimous Consent Rule Requires
Under California’s RULLCA, unless the operating agreement provides otherwise, the following actions require unanimous consent of all LLC members:
Selling, leasing, exchanging, or otherwise disposing of all or substantially all of the LLC’s property outside the ordinary course of business. Merging the LLC with another entity. Converting the LLC to a different entity type. Amending the articles of organization. Amending the operating agreement itself. Admitting new members. Dissolving the LLC.
“Unanimous” means every single member — regardless of ownership percentage. A 1% member has equal veto power over these decisions as the 99% member, unless your operating agreement explicitly provides otherwise. In a two-person LLC where the co-founders disagree about whether to sell the company, accept a strategic investor, or bring in a new partner, the minority member can block every one of those actions indefinitely.
Why This Is a Bigger Problem Than It Sounds
Before RULLCA, California’s prior LLC statute required unanimous member approval for a narrower set of actions — primarily amendments to formation documents and certain fundamental transactions. The new statute expanded the unanimous consent requirement significantly. Entrepreneurs who formed LLCs under the old statute and haven’t updated their operating agreements may be operating under rules they don’t know have changed.
More importantly, entrepreneurs who used a generic LLC operating agreement template — from LegalZoom, a law firm’s website, or a Google search — may have an agreement that doesn’t address RULLCA’s expanded requirements. The default rules fill every gap. If your operating agreement is silent on how votes are counted for a major asset sale, California law answers for you: unanimous consent required.
Real Scenarios Where This Becomes a Crisis
The acquisition offer scenario: Your LLC receives an offer at a valuation all but one member finds attractive. The dissenting member — a co-founder granted 5% for early contributions — refuses to approve the sale. Under RULLCA’s default rules, the sale cannot proceed. Your operating agreement doesn’t address this situation because you used a template. The deal dies.
The asset sale pivot scenario: Your LLC needs to sell its primary asset — the equipment, the IP portfolio, the real estate — to fund a pivot to a new business model. One investor-member representing 8% of ownership objects. Absent an operating agreement provision allowing majority or supermajority approval for asset sales outside ordinary course, the 8% holder blocks the transaction indefinitely.
The new member admission scenario: You want to bring in a strategic partner or key employee quickly to capitalize on a time-sensitive opportunity. Any existing member can object, and their objection is dispositive under the default rules. The admission cannot proceed until everyone agrees — including members who have no ongoing involvement in the business.
The Fix Requires a Proper Operating Agreement
California’s RULLCA is largely a default statute — its rules apply “unless otherwise provided” in the operating agreement. A well-drafted operating agreement can override the unanimous consent requirements for most decisions, substituting majority vote, supermajority vote, or manager approval as the applicable standard.
Common overrides include manager-managed structures where business decisions are delegated to a designated manager or management committee, majority vote requirements for asset dispositions below a defined threshold, supermajority requirements (typically 66.7% or 75%) for fundamental transactions, and explicit provisions governing member admission without unanimous consent.
The critical phrase is “well-drafted.” Generic templates frequently use language from other states’ LLC statutes that doesn’t map to California law, or fail to anticipate the scenarios most likely to create conflict in your specific business. This is one area where investing in a proper California business attorney is not optional. The cost of a thorough operating agreement — typically $1,500 to $3,000 from a competent California business attorney — is trivial compared to the cost of a blocked acquisition or a deadlocked LLC.
If You Already Have a Bad Operating Agreement
If your existing California LLC’s operating agreement predates RULLCA or was drafted from a generic template, get it reviewed now — before you need it to work under pressure. Amending an operating agreement requires, under RULLCA’s default rules, unanimous member consent. That means all members need to agree to the amendment while they still agree on everything. Wait until a disagreement has surfaced and you may not be able to pass the amendment needed to resolve it.
The window to fix this problem is while everyone is aligned. That window closes the moment interests diverge. Use it.
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