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Operating Agreement

Added by Sam Vernon about 2 months ago. Updated about 1 month ago.

Status:
In Progress
Priority:
Normal
Assignee:
Start date:
05/23/2026
Due date:
% Done:

0%

Estimated time:

Description

Here are the suggestions of what and how to modify:

Terminology — "Members" vs. "Partners"
Pick one term and define it. "Member" is the legally correct term for LLC owners under Florida Statute Chapter 605; "partner" implies a partnership entity (and has specific tax meaning). Add a definitions section at the top, or define on first use:

"Founding Member" means each of Pavel Sergeyev and Slava Virnik. References throughout this Agreement to "founding partner," "partner," "member," or similar terms shall mean a Founding Member as defined herein.

Then global-find-replace "founding partner" → "Founding Member" throughout. The §10 reference to "qualified professionals" is fine to keep as-is.
§4 — Define "Major Decisions"
Replace §4 with an enumerated list. Suggested language:

  1. Voting and Decision-Making. The following matters constitute "Major Decisions" and require unanimous written approval of both Founding Members:
    (a) any expenditure, contract, or financial commitment exceeding $500 (subject to §7);
    (b) borrowing, financing, or incurring debt of any kind on behalf of the Company;
    (c) opening, closing, or changing signatories on Company bank or financial accounts;
    (d) hiring, terminating, or setting compensation for employees, contractors, or professional service providers with annualized cost above $5,000;
    (e) entering into, modifying, or terminating any lease, license, or contract with a term exceeding twelve (12) months;
    (f) admitting any new Member or issuing any new ownership interest;
    (g) selling, transferring, or encumbering Company assets outside the ordinary course of business;
    (h) initiating, settling, or compromising litigation involving the Company;
    (i) amending this Agreement, the Articles of Organization, or any governing document;
    (j) changing the Company's tax classification or making any material tax election;
    (k) declaring distributions to Members;
    (l) merging, converting, dissolving, or selling substantially all of the Company's assets;
    (m) adopting or materially modifying the Company's annual budget or business plan;
    (n) licensing, transferring, or encumbering any Company intellectual property.
    All other day-to-day operational matters not constituting Major Decisions may be undertaken by either Founding Member in the ordinary course of business, subject to the duty of good-faith communication with the other Founding Member.

Tailor the dollar thresholds to your actual business scale.
Fiduciary Duties
Florida § 605.04091 imposes default duties of loyalty and care; § 605.0105(3) limits how much you can waive them, but you can define what doesn't violate them and require informed consent for specified activities. Add:

X. Fiduciary Duties. Each Founding Member owes the Company and the other Founding Member the duties of loyalty and care described in Florida Statutes § 605.04091, and shall act in good faith and with fair dealing in all Company matters. Notwithstanding the foregoing, and to the extent permitted by Florida Statutes § 605.0105:
(a) a Founding Member may engage in outside business activities that do not directly compete with the Company, provided the activities are disclosed in writing in advance to the other Founding Member;
(b) any direct or indirect transaction between the Company and a Founding Member (or that Member's family, affiliates, or related entities) requires advance written disclosure and unanimous written approval;
(c) each Founding Member shall promptly disclose to the Company any business opportunity reasonably related to the Company's business, and may not pursue it personally without unanimous written consent.

"Commercially Reasonable Installment Payments" — §12
Replace the vague phrase with specifics:

Unless the Founding Members otherwise unanimously agree in writing, the buyout obligation shall be paid as follows: (a) twenty percent (20%) of the purchase price within sixty (60) days of the valuation determination; and (b) the remaining balance payable in equal monthly installments over five (5) years, evidenced by a promissory note bearing simple interest at the Wall Street Journal Prime Rate as of the closing date, plus one percent (1%), with a right to prepay without penalty. The note shall be secured by a pledge of the transferred ownership interest. Failure to make any payment within thirty (30) days of its due date, after written notice and a fifteen (15) day cure period, shall constitute default and accelerate the entire remaining balance.

Adjust the numbers (down payment %, term length, rate) to whatever you both consider fair.
"Prolonged Period of Time" — §14 Incapacity
Define the trigger and the determination process:

  1. Incapacity of a Founding Member. A Founding Member shall be deemed "Incapacitated" upon the earlier of:
    (a) a court order or legal determination of incapacity, guardianship, or conservatorship;
    (b) written certification by two (2) licensed physicians (at least one of whom is a specialist in the relevant condition) that the Member is unable to participate in Company operations and that such inability is expected to continue for at least one hundred eighty (180) days; or
    (c) the Member's inability, due to medical, mental, or legal condition, to meaningfully participate in Company operations for one hundred eighty (180) consecutive days, as reasonably determined by the other Founding Member acting in good faith.
    Upon Incapacity, the Incapacitated Member's economic ownership interest shall be retained by the Member (or pass to that Member's spouse, family, estate, or lawful representative as applicable), and the remaining Founding Member shall retain sole operational and managerial control of the Company. If the Incapacitated Member subsequently recovers and is certified by a licensed physician as able to resume Company participation, the Members shall in good faith negotiate the terms of the Member's return to active management.

You should also decide whether the surviving member has a buyout option here, similar to §12 — many agreements include one to avoid permanent split-control situations.
§13 — Inheritance Mechanics
Replace with clearer language tied to the estate plan:

  1. Death of a Founding Member. Upon the death of a Founding Member, that Member's ownership interest shall pass according to the Member's last will and testament, revocable trust, or other operative estate planning instrument, or, in the absence of such instruments, by the laws of intestate succession of the State of Florida. Pending completion of probate or trust administration, the deceased Member's interest shall be held by the Member's personal representative or trustee, who shall hold economic rights only and shall not exercise voting or management authority. The surviving Founding Member shall retain sole operational and managerial control of the Company.
    The surviving Founding Member shall have a right of first refusal to purchase the deceased Member's interest from the estate, heirs, or trust on terms equivalent to those set forth in §12 (Withdrawal Valuation Procedure). The right of first refusal must be exercised by written notice within ninety (90) days following the surviving Member's receipt of written notice from the estate or heirs of intent to retain or transfer the interest.

Also recommend adding a parallel ROFR to §16 so the surviving founder has first crack at any third-party transfer attempts by heirs.
§8 — Contract Authority
Eliminate verbal authorization:

  1. Contract Authority. Any Company contract or legally binding agreement requires unanimous approval of both Founding Members. Either Founding Member may authorize the other to execute or sign a specific contract on behalf of the Company, provided such authorization is in writing or by email (which the parties agree satisfies the writing requirement). Verbal authorization shall not be effective. A general or standing authorization to execute contracts within a defined category may be granted by written instrument signed by both Founding Members, and may be revoked at any time by written notice to the other Member.

§20 — Confidentiality
Replace with a more complete provision:

  1. Confidentiality.
    (a) Definition. "Confidential Information" means all non-public information of the Company, including without limitation trade secrets, software, source code, business methods, financial information, customer and user information, internal operations, proprietary data, strategic plans, vendor information, pricing, and any information marked confidential or that a reasonable person would understand to be confidential.
    (b) Obligations. Each Founding Member shall (i) use Confidential Information solely for the benefit of the Company; (ii) not disclose Confidential Information to any third party without prior written consent of the other Founding Member or as required for Company business with parties bound by equivalent confidentiality obligations; and (iii) use at least the same degree of care to protect Confidential Information as the Member uses for the Member's own confidential information, but in no event less than reasonable care.
    (c) Exclusions. Confidential Information does not include information that: (i) is or becomes publicly available through no fault of the Member; (ii) was lawfully known to the Member before disclosure by the Company, without confidentiality obligation; (iii) is independently developed by the Member without use of Confidential Information; or (iv) is required to be disclosed by law, court order, or governmental authority, provided the disclosing Member gives prompt written notice (where legally permitted) to allow the other Member or the Company to seek a protective order.
    (d) Return of Materials. Upon withdrawal, resignation, removal, or dissolution, each Member shall promptly return or, at the Company's option, destroy all Confidential Information in the Member's possession and certify such return or destruction in writing.
    (e) Remedies. The Members acknowledge that monetary damages may be inadequate for breach of this section, and that the Company shall be entitled to seek injunctive and other equitable relief in addition to any other remedies available at law or in equity.
    (f) Duration. The obligations of this section shall survive withdrawal, removal, death, incapacity, or dissolution and shall remain in effect indefinitely with respect to trade secrets, and for a period of five (5) years following the end of the Member's involvement with respect to all other Confidential Information.

§21 — Intellectual Property
Add a present assignment with further-assurances and pre-existing-IP language:

  1. Intellectual Property.
    (a) Company Ownership. All intellectual property, including without limitation software, source code, algorithms, designs, branding, trademarks, service marks, logos, domain names, databases, content, documentation, inventions, improvements, methods, processes, and all related rights worldwide (collectively, "Company IP") that is (i) created, developed, or contributed by a Founding Member during the course of and in connection with Company business, or (ii) created using Company resources, shall be the exclusive property of the Company.
    (b) Present Assignment. Each Founding Member hereby irrevocably assigns, transfers, and conveys to the Company all right, title, and interest in and to all Company IP, including all copyrights, patent rights, trademark rights, trade secret rights, and moral rights (to the extent waivable), now existing or hereafter created.
    (c) Further Assurances. Each Founding Member shall, at the Company's reasonable request and expense, execute documents and take actions necessary to perfect, register, enforce, or defend the Company's rights in Company IP. Each Member irrevocably appoints the Company as the Member's attorney-in-fact to execute such documents if the Member fails or refuses to do so within fifteen (15) days of request.
    (d) Pre-Existing IP. Each Founding Member shall identify in a written schedule (attached as Exhibit A) any intellectual property owned by the Member before the date of this Agreement that the Member intends to make available for Company use ("Pre-Existing IP"). The Member retains ownership of Pre-Existing IP but grants the Company a perpetual, irrevocable, worldwide, royalty-free, sublicensable license to use, modify, and distribute such Pre-Existing IP in connection with Company business. Pre-Existing IP not listed on Exhibit A shall be deemed assigned to the Company if used in Company products or operations.
    (e) No Conflicting Obligations. Each Founding Member represents that the Member's performance under this Agreement and contribution of IP to the Company does not and will not breach any obligation to a former employer or third party.

Attach the Exhibit A schedule and actually fill it in — this matters if either founder is bringing pre-existing code, designs, or a domain name to the venture.
§23 — Dissolution
Replace with a procedural framework:

  1. Dissolution.
    (a) Events of Dissolution. The Company shall be dissolved upon the earliest of: (i) unanimous written agreement of the Founding Members; (ii) entry of a judicial decree of dissolution; (iii) any event causing dissolution under Florida Statutes Chapter 605 that the Members do not elect to cure within ninety (90) days; or (iv) following exhaustion of the deadlock resolution procedure in §22, if the arbitrator determines that dissolution is the appropriate remedy.
    (b) Winding Up. Upon dissolution, the Members shall jointly serve as liquidators, or shall by unanimous written agreement appoint a single liquidator, who shall wind up the Company's affairs by: (i) preparing a final accounting; (ii) collecting receivables and liquidating assets in a commercially reasonable manner; (iii) paying or providing for Company debts and liabilities; (iv) filing required tax returns and dissolution documents with the State of Florida; and (v) distributing remaining assets as set forth below.
    (c) Priority of Distributions. After dissolution, the Company's assets shall be distributed in the following order: (i) to creditors (other than Members) in satisfaction of Company debts; (ii) to Members in satisfaction of any loans made by them to the Company; (iii) to Members in proportion to and to the extent of their positive capital account balances; and (iv) any remainder to the Members in proportion to their ownership interests.
    (d) Sale as Going Concern. Prior to liquidating individual assets, the liquidator(s) shall consider in good faith whether the Company's value would be better realized through sale as a going concern, and shall pursue such sale if the Founding Members unanimously so direct.
    (e) Deadlock During Winding Up. Any disagreement between the Members during winding up that cannot be resolved within thirty (30) days shall be submitted to a single neutral accountant, mutually agreed or appointed by the American Arbitration Association, whose determination shall be final and binding.

Boilerplate Section
Add a final article (call it "General Provisions" or "Miscellaneous") with the following:

X.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without regard to its conflict-of-laws principles. Any action arising under this Agreement, other than matters subject to arbitration under §22, shall be brought exclusively in the state or federal courts located in [County], Florida, and the parties consent to personal jurisdiction in such courts.
X.2 Severability. If any provision of this Agreement is held invalid, illegal, or unenforceable by a court of competent jurisdiction, the remaining provisions shall continue in full force and effect, and the invalid provision shall be deemed modified to the minimum extent necessary to make it valid and enforceable while preserving the parties' original intent.
X.3 Entire Agreement. This Agreement, together with any Exhibits attached hereto and any documents expressly referenced herein, constitutes the entire agreement between the Founding Members concerning the subject matter and supersedes all prior or contemporaneous agreements, representations, and understandings, whether written or oral.
X.4 Notices. Any notice, demand, or communication required or permitted under this Agreement shall be in writing and shall be deemed given when: (a) delivered personally; (b) sent by email to the address designated by the Member, with confirmation of delivery; (c) sent by nationally recognized overnight courier; or (d) sent by certified mail, return receipt requested. Notices shall be sent to the addresses set forth on the signature page or to such other address as a Member may designate by written notice. Email notice is sufficient for routine matters but not for notices of default, withdrawal, dissolution, or breach, which require one of the other methods.
X.5 Counterparts; Electronic Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Signatures delivered by electronic means (including PDF and recognized e-signature platforms) shall have the same legal effect as original signatures.
X.6 Amendment. This Agreement may be amended only by written instrument signed by both Founding Members.
X.7 Waiver. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the waiving Member. No waiver of any breach shall constitute a waiver of any subsequent or other breach.
X.8 Successors and Assigns. Subject to the transfer restrictions in this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, successors, and permitted assigns.
X.9 Construction. The headings in this Agreement are for convenience only and shall not affect interpretation. References to "including" mean "including without limitation." The singular includes the plural and vice versa.
X.10 Independent Legal Counsel. Each Founding Member acknowledges having had the opportunity to consult with independent legal counsel of the Member's own choosing before executing this Agreement.


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Updated by Sam Vernon about 1 month ago

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