The LLC Operating Agreement Toolkit: Formation Essentials, Management Structures, and Strategies to Avoid Disputes, Deadlocks, and Tax Pitfalls

Michael J. Gorby | Gorby Peters & Associates, LLC

Mike Gorby is a founding member of Gorby Peters & Associates, LLC. He is a nationally recognized leader in complex corporate disputes, and liability issues that arise for property owners and managers, such as hotel chains, restaurants, shopping centers, apartment complexes, office buildings, and other public venues. Mike’s work also includes advising start up clients on the different forms of business structures and the most advantageous entity selection for the client. Mike has served as the program chair for the Institute of Continuing Legal Education in Georgia (an affiliate of the University of Georgia) on the topic of Premises Liability. He is also the author of a popular legal treatise, Premises Liability in Georgia, which is published by Thomson Reuters/West, and which is now in its Third edition. Mike also serves as an instructor/lecturer for Georgia Tech Procurement Assistance Center (GTPAC) in the area of procuring government contracts and is also a registered mediator.

Brandi Joffrion | B. Joffrion Consulting LLC

Ms. Joffrion specializes in guiding entrepreneurs, startups, and small businesses in choosing the right legal structure for their ventures, whether that’s forming a Limited Liability Company (LLC) or a corporation. With years of experience advising clients on the nuances of business entities, she helps demystify the process and ensure that your business is set up for success from the start.

Her consulting is rooted in a rich legal background. Prior to focusing on business formations, Ms. Joffrion worked extensively in litigation, developing a deep understanding of how the legal system impacts business operations. Additionally, she had the privilege of overseeing an Anti-Money Laundering (AML) compliance department for an overseas law firm. This role sharpened her skills in navigating complex regulatory frameworks and emphasized the importance of risk management in business operations.

Whether you’re a solo entrepreneur or leading a growing team, Ms. Joffrion’s mission is to equip you with the knowledge and tools to make informed decisions about your business structure. Together, you can identify the best path to protect your assets, optimize tax benefits, and position your business for growth.

Maria Fernandez | Gorby Peters & Associates, LLC

Maria is a paralegal and technical writer for Gorby Peters Law. Maria graduated from Georgia State University with a Bachelor of Interdisciplinary Studies in Language Studies & Applied Linguistics, as well as a Master of Arts in Applied Linguistics. Maria presented “Web Registers: A Corpus-Based Comparison” at the 10th Conference for the American Association for Corpus Linguistics. She also holds several certificates, including a certificate in Spanish Language Studies from the University of Barcelona, TESOL certification to teach internationally, and finally, a paralegal certificate from the University of Georgia.

Maria has also worked extensively in the field of interpreted English transcription, helping to provide investor event coverage for many international companies. She enjoys the bustle of earnings calls, shareholder meetings, and analyst days.

While Maria lived in San Francisco, she was responsible for the technical editing of Python for Kids: A Playful Introduction to Programming by Jason Briggs. She also participated in extensive volunteer work for the Coalition on Homelessness and St. Dominic’s Justice, Peace, & Integrity of Creation.

Maria enjoys archery and spending time in nature. She is also constantly reading about emerging technology, internet security, artificial intelligence, and current events.

Session I – LLC Formation Fundamentals and Drafting Essential Core Documents | 12:00pm – 1:00pm

• Variations among states as to LLC formation requirements
• Resolving conflicts between state requirements for the operation of an LLC and the LLC’s operating agreement
• Charging orders from a court and the effect of the LLC

Break | 1:00pm – 1:10pm 

Session II – Implementing Effective LLC Management Structures | 1:10pm – 2:10pm 

• Factors to consider in choosing a management structure and a management team
• Determining which issues require a majority versus a super-majority versus an unanimity vote
• Variations among states as to duties and other responsibilities of members and managers

Break | 2:10pm – 2:20pm

Session III – Inside the LLC: Managing Transfers, Buyouts, Deadlocks, and Tax Traps | 2:20pm – 3:20pm

• Transfers of LLC interests
  • Voluntary vs. involuntary transfers
  • Restrictions under operating agreements and state law
  • Rights of transferees vs. members
  • Drag-along and tag-along provisions
  • Impact on management and tax status
• Member buyouts
  • Triggering events: Death, divorce, expulsion, resignation
  • Valuation methods: Fair market value, book value, formulas
  • Funding mechanisms (insurance, promissory notes, capital reserves)
  • Drafting enforceable buy-sell provisions
• Capital calls
  • Procedures for calling additional capital
  • Member obligations and consequences of non-payment
  • Dilution, penalties, and remedies for defaulting members
  • Preemptive rights and contribution limits
• Resolving business deadlocks
  • Common sources: 50/50 ownership, veto rights, lack of operating agreement clarity
  • Deadlock-breaking mechanisms: Mediation, arbitration, buy-sell triggers, appointment of independent manager
  • Judicial remedies: Dissolution, court-appointed receiver
  • Preventive drafting strategies
• Allocations of profits and losses
  • Economic reality vs. tax allocations under IRC §704(b)
  • Disproportionate allocations and special allocations
  • Capital account maintenance and revaluation events
  • Operating agreement best practices for clarity and consistency
• Distributions
  • Timing and discretion in making distributions
  • Priority waterfall structures: Preferred returns, return of capital, profit splits
  • Mandatory vs. discretionary distributions
  • Relationship between tax allocations and cash distributions
• Tax treatment considerations
  • Default tax classifications of LLCs (partnership, disregarded entity, corporation)
  • Basis tracking and tax capital account compliance
  • Impact of capital contributions and distributions on tax basis
  • Withholding obligations and phantom income risks
  • Exit planning and tax consequences of buyouts or dissolutions