Does state law require unanimous member consent to sell LLC assets when the operating agreement is missing?

Does state law require unanimous member consent to sell LLC assets when the operating agreement is missing?

Yes, in the vast majority of U.S. jurisdictions, state default laws require unanimous member consent to sell all or substantially all of an LLC's assets if no operating agreement exists to specify otherwise. Without a written agreement, you are subject to the rigid default provisions of your state's Limited Liability Company Act, which typically prioritize member protection over operational flexibility.

The Default Rule: Statutory Requirements

When an LLC is formed, it is governed by the state statute under which it was organized. These statutes act as a "gap-filler" for businesses that fail to draft a custom operating agreement. Most state statutes, such as those in Delaware, California, and New York, contain specific provisions regarding the sale of assets outside the ordinary course of business.

Why Unanimity is the Default

Legislators drafted these default rules to prevent majority members from stripping the company of its value without the consent of minority stakeholders. Because the sale of "all or substantially all" assets is considered a fundamental change to the business, the law defaults to the highest level of protection: unanimous consent.

• Fundamental Change Doctrine: Courts view the sale of core assets as a liquidation of the business purpose.
• Minority Protection: Unanimity prevents majority "squeeze-outs" where assets are sold to a related party at an undervalued price.
• Statutory Rigidity: Unlike a custom contract, state statutes cannot be easily modified to fit specific business needs once a dispute arises.

Key takeaway: If you do not have an operating agreement, you are legally bound by the default statute of your formation state. In most cases, this means you cannot sell the company's assets without 100% member approval.

Comparing State Approaches to Asset Sales

While most states lean toward unanimity, the specific language in the statute can vary. Below is a comparison of how different jurisdictions handle fundamental changes in the absence of an operating agreement.

Action Item: Check your state's specific LLC Act. Even if your state allows a "majority in interest" for some actions, "all or substantially all" asset sales often trigger a higher threshold regardless of the default rule for day-to-day operations.

Risks of Operating Without an Agreement

Operating without a written agreement is a significant liability. When you rely on state law, you lose the ability to define what constitutes an "asset sale" or to establish a lower voting threshold (e.g., 60% or 75%) for business exits.

Common Pitfalls

1. Deadlock: If one member refuses to sell, the entire transaction stalls, potentially leading to a breach of contract with the buyer.
2. Valuation Disputes: Without a pre-agreed mechanism for valuation, minority members can sue, claiming the sale price is below fair market value.
3. Fiduciary Litigation: Majority members may be accused of breaching their fiduciary duties if they attempt to force a sale without clear statutory authority.

How to Mitigate Risk

If you are currently in a position where you need to sell assets but lack an operating agreement, you must take immediate steps to formalize the process.

• Draft a Unanimous Consent Resolution: Even if you don't have an operating agreement, having all members sign a written resolution authorizing the sale can cure potential defects.
• Seek Legal Counsel: Before initiating a sale, consult with a business attorney to determine if your state allows for a "member-managed" vs. "manager-managed" distinction that could alter your voting requirements.
• Retroactive Agreements: Consider drafting an operating agreement now that clarifies voting rights for future transactions, though this will not retroactively fix past governance failures.

Key takeaway: Never assume you have the power to sell company assets based on your percentage of ownership alone. Without a written agreement, the law often requires every single member to sign off on the deal.

Conclusion

The absence of an operating agreement creates a default environment that is often hostile to efficient business transactions. By defaulting to unanimous consent, state law effectively gives every member a veto over the sale of assets. To avoid these pitfalls, ensure your governance documents are clear, current, and legally robust.

TermScore can automatically analyze your existing contracts and operating agreements to identify voting thresholds, asset sale restrictions, and governance gaps, helping you avoid legal disputes before they arise.