Two-Member LLC: Template Revision, a Private Question, and an Investor
Your firm represents a two-member LLC being formed by Ana and Ben. Ana will contribute $60,000 and Ben $20,000; they want a 60/40 split and Ana as sole manager. They downloaded an operating agreement from a website and ask you to 'just change the names and percentages.' Ben also wants to give 10% to an investor next year and asks whether the agreement needs a vesting schedule. During a phone call, Ben asks you privately, 'If Ana and I split up, can I force her to buy me out?' The firm's engagement letter names the LLC as the client. The attorney asks you to prepare a first draft of the operating agreement from the downloaded template and a summary of filing steps.
1. Can you revise the downloaded operating agreement and advise Ana and Ben on its terms?
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No. I can type, format, and assemble a draft at the attorney's direction, but I cannot select or revise substantive terms in an operating agreement or explain their legal effect. Choosing a 60/40 split, manager-managed structure, capital-account language, transfer restrictions, or vesting schedule is legal and tax advice. The downloaded template may be wrong for the state, may not address the investor, and may create securities or tax problems. I would review it for missing blanks and inconsistencies and prepare a memo listing issues for the attorney: capital contributions, voting, distributions, management, transfer restrictions, buyout, and the proposed 10% investor. I should not tell Ana and Ben that the changes are 'just names and percentages.' The attorney must review and approve the final document before it is sent to the clients, and I should document that I did not give advice.
2. How do you handle Ben's private question about forcing a buyout?
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Ben's question is a conflict red flag. The firm represents the LLC, not Ana or Ben individually, so I cannot give him legal advice or keep his question confidential from the attorney. I would tell him I am not able to advise him on a buyout and that the attorney will need to address whether he should have separate counsel. I would report the conversation to the supervising attorney immediately and document it, because the question may signal a member dispute adverse to the LLC or to Ana. The firm may need a conflict waiver or may need to decline the individual representation. I would not speculate about buyout rights or say 'that stays between us.' The paralegal's duty runs to the firm and the client entity, and silence could create an unwaived conflict.
3. What should you flag about the proposed 10% investor and the engagement scope?
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I would flag the 10% investor as a legal issue, not a drafting detail. Issuing membership interests can implicate federal and state securities law, the operating agreement's transfer and dilution provisions, capital-account and tax allocations, and the existing members' consent rights. A vesting schedule for the investor may be appropriate, but I cannot decide that or draft it as a conclusion. I would ask the attorney whether the firm is handling the securities exemption, whether the engagement letter covers the investor transaction, and whether a separate subscription agreement and updated operating agreement are needed. I would also note that the engagement letter names only the LLC, so communications with Ana and Ben individually need care. I can prepare a checklist and a first draft at the attorney's direction, but I should not tell Ben the issuance is 'no problem.'