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Most entrepreneurs treat the LLC 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 defaults — 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, the following actions require unanimous consent of all LLC 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 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 — with no legal remedy available to the majority unless the operating agreement provides one.
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 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 template — from LegalZoom, a law firm website, or a Google search — may have an agreement that doesn’t address RULLCA’s expanded requirements at all. 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
Your LLC receives an acquisition offer at a valuation all but one member finds attractive. The dissenting co-founder with 5% refuses to approve the sale. Under RULLCA defaults, the sale cannot proceed. The deal dies. Or: your LLC needs to sell its primary asset to fund a pivot. One investor-member representing 8% of ownership objects. Absent an operating agreement provision allowing majority or supermajority approval, the 8% holder blocks the transaction indefinitely.
The Fix Requires a Proper Operating Agreement
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.
The critical phrase is “well-drafted.” Generic templates frequently don’t address RULLCA’s specific requirements, use language from other states’ statutes that doesn’t map to California law, or fail to anticipate the scenarios most likely to create conflict in your type of business. A proper California business attorney costs $1,500 to $3,000 for a solid operating agreement — trivial compared to the cost of a blocked acquisition or a deadlocked LLC years later.
The window to fix this is while everyone agrees. Amending an operating agreement requires — under RULLCA defaults — unanimous member consent. Wait until a disagreement surfaces and you may not be able to get the amendment passed to resolve it. Fix it now.
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