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Most entrepreneurs treat the LLC operating agreement as paperwork — something to sign and forget. In California, that approach is a trap. The California Revised Uniform Limited Liability Company Act (RULLCA) imposes default rules governing your LLC unless your operating agreement expressly overrides them. One default — the unanimous consent requirement — can paralyze your company at exactly the moment you need to move fast.
What the Rule Requires
Under RULLCA, unless the operating agreement says otherwise, these actions require unanimous consent of all members: selling or disposing of all or substantially all LLC property outside ordinary course of business, merging with another entity, converting to a different entity type, amending the articles of organization, amending the operating agreement itself, admitting new members, and 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. In a two-person LLC where co-founders disagree about selling the company or admitting an investor, the minority member can block every one of those actions indefinitely.
Why This Is Worse Than It Sounds
Before RULLCA, California’s prior statute required unanimous approval for a narrower set of actions. The new statute expanded the requirement significantly. Entrepreneurs who formed LLCs under the old statute without updating their agreements may be operating under rules they don’t know have changed. Entrepreneurs who downloaded a generic template from LegalZoom or a law firm website may have an agreement that doesn’t address RULLCA’s specific expanded requirements — and the default rules fill every gap against the majority.
Real Scenarios That Become Crises
Your LLC receives an acquisition offer that all but one member finds attractive. The dissenting 5% co-founder refuses to approve. Under RULLCA defaults, the sale cannot proceed. The deal dies. Or: your LLC needs to sell its primary asset to fund a pivot. One 8% investor-member objects. Absent an operating agreement override allowing supermajority approval, the 8% holder blocks the transaction indefinitely with no legal recourse for the majority.
The Fix — Before You Need It
RULLCA is a default statute — its rules apply “unless otherwise provided” in the operating agreement. A well-drafted operating agreement substitutes majority vote, supermajority, or manager approval for most decisions RULLCA defaults to unanimous. Cost: $1,500 to $3,000 from a competent California business attorney — trivial compared to a blocked acquisition or deadlocked LLC. The window to fix it is while everyone agrees. Once a disagreement surfaces, amending an operating agreement requires — under RULLCA defaults — unanimous consent. You may not be able to pass the amendment needed to resolve the dispute that’s blocking you. Fix it now.
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