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

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

Yes, in the vast majority of U.S. jurisdictions, state default statutes require unanimous member consent to sell all or substantially all of an LLC's assets if no operating agreement exists. Because the operating agreement is the primary document used to override statutory defaults, its absence leaves the LLC subject to rigid, often restrictive, state-mandated voting requirements.

Understanding the Default Statutory Framework

When you form an LLC, you are essentially entering into a contract with the state. If you fail to draft a custom operating agreement, you are opting into the "default rules" provided by the state's Limited Liability Company Act. These statutes are designed to protect minority members by requiring consensus for major structural changes.

Why Unanimous Consent is the Default

State legislatures assume that if members have not agreed on a specific voting procedure, they likely intend for major decisions—like liquidating the business or selling its core assets—to require the agreement of every owner. This prevents a majority from "cashing out" or stripping the company of its value against the wishes of minority stakeholders.

Key takeaway: Never assume that a simple majority vote (51%) is sufficient to sell company assets. Without a written agreement, you are likely legally bound to a 100% unanimous approval threshold.

Action Item: Check your state’s Secretary of State website to locate the specific LLC Act for your jurisdiction. Search for terms like "sale of assets" or "fundamental changes" to confirm your state's specific default percentage.

Comparing Voting Thresholds: Default vs. Custom Agreements

The following table illustrates how voting requirements shift when you move from default state law to a customized operating agreement.

Risks of Operating Without a Written Agreement

Operating an LLC without a formal agreement creates significant legal exposure. When a dispute arises regarding the sale of assets, the lack of a document forces the parties into a "default" scenario that may not reflect the actual business intent of the members.

• Deadlock: If one member refuses to sell, the entire transaction can be blocked, potentially causing the company to lose a lucrative offer.
• Litigation Costs: Disputes over whether a sale constitutes "ordinary course of business" often end up in court, costing thousands in legal fees.
• Valuation Disputes: Without a pre-agreed mechanism for valuing assets, members may disagree on the sale price, leading to claims of breach of fiduciary duty.

Action Item: If you are currently in a deadlock, document all communications regarding the proposed sale in writing. This creates a paper trail should the matter proceed to judicial dissolution or arbitration.

How to Rectify the Situation

If you realize your LLC lacks an operating agreement, you are not necessarily stuck with the default rules forever. You can adopt an operating agreement at any time, provided all current members agree to the terms.

1. Drafting: Retain legal counsel to draft an agreement that specifies voting thresholds for asset sales.
2. Negotiation: Discuss the specific percentage required for major sales (e.g., 66% or 75% instead of 100%).
3. Execution: Ensure every member signs the document.
4. Storage: Keep the signed original in your company records book.

The Role of Fiduciary Duties

Even if you have the power to sell assets, you are bound by fiduciary duties of loyalty and care. Selling assets at a "fire sale" price to a related party, even if you have the required votes, can still lead to a lawsuit from minority members for "oppressive conduct." Always ensure that any major asset sale is supported by an independent valuation and a clear business justification.

Key takeaway: A vote is not a shield against liability. Even if you meet the statutory voting threshold, you must demonstrate that the sale is in the best interest of the company and its members.

Action Item: Before initiating a sale, obtain a third-party appraisal of the assets. This provides objective evidence that the sale price is fair, significantly reducing the risk of future litigation.

Streamlining Compliance with TermScore

Navigating the intersection of state law and internal governance is complex, but you don't have to do it alone. TermScore uses advanced AI to analyze your existing contracts and operating agreements, instantly flagging missing clauses, restrictive voting thresholds, and potential compliance gaps. By identifying these risks early, TermScore helps you secure your business decisions before they become legal liabilities.