Does state law require unanimous member consent to sell LLC assets without an operating agreement?

Does State Law Require Unanimous Consent to Sell LLC Assets?

Yes, in the vast majority of U.S. jurisdictions, state default statutes require unanimous member consent to sell, lease, exchange, or otherwise dispose of all or substantially all of an LLC's assets outside the ordinary course of business when no operating agreement exists to dictate otherwise.

Key takeaway: Without a written operating agreement, you are bound by the default "gap-filler" provisions of your state's LLC Act, which are almost universally designed to protect minority members by requiring 100% approval for major transactions.

Understanding Default Statutory Rules

When an LLC is formed without an operating agreement, the state's Limited Liability Company Act serves as the governing document. These statutes are designed to be conservative, prioritizing the protection of member interests over operational efficiency. If you attempt to sell the company's primary assets, you are engaging in a "fundamental change" to the business structure.

The "Ordinary Course of Business" Exception

State laws distinguish between routine transactions and extraordinary ones. Selling inventory in a retail shop is in the ordinary course of business and usually requires only a majority vote or manager approval. However, selling the entire business or its core assets is considered an extraordinary event.

• Ordinary Course: Selling products, paying rent, hiring staff.
• Extraordinary Course: Selling the company's real estate, intellectual property portfolio, or the entire business entity.

Action Item: Review your state's specific LLC statute (e.g., Delaware LLC Act Section 18-402 or California Corporations Code Section 17704.07) to confirm the exact threshold for "extraordinary" transactions.

Risks of Proceeding Without Unanimous Consent

Ignoring the requirement for unanimous consent exposes the managing member or the majority owners to significant legal peril. Courts generally view the sale of all assets as a dissolution-level event, which triggers strict scrutiny.

Action Item: If you are a majority owner, do not attempt to sell assets without a written waiver or consent form signed by every single member, regardless of their ownership percentage.

How to Mitigate Default Rule Restrictions

The most effective way to avoid the rigidity of state default laws is to implement a customized operating agreement. This document allows you to replace the "unanimous" requirement with a more practical threshold, such as a simple majority (51%) or a supermajority (66.7% or 75%).

1. Draft an Operating Agreement: Explicitly state the voting requirements for the sale of all or substantially all assets.
2. Define "Substantially All": Use clear metrics, such as "any transaction involving more than 50% of the fair market value of the LLC's assets."
3. Formalize Member Approval: Ensure all members sign the agreement upon formation or during a formal amendment process.
4. Document the Vote: Maintain a written record of the meeting or written consent where the sale was approved.

Key takeaway: An operating agreement is the only way to legally bypass the default requirement for unanimous consent. Once signed, the contract terms supersede the state's default statutory provisions.

Jurisdictional Nuances

While most states follow the Uniform Limited Liability Company Act (ULLCA) model, there are variations. For instance, Delaware offers maximum flexibility, allowing members to waive almost any fiduciary duty or voting requirement in the operating agreement. Conversely, states like New York or California may have more rigid statutory protections that are harder to waive entirely.

Action Item: Consult with local counsel to determine if your state allows for "majority-rule" provisions in the sale of assets, as some states require a minimum supermajority even if the operating agreement suggests otherwise.

Streamlining Compliance with TermScore

Navigating the intersection of state law and internal governance is complex. TermScore uses advanced AI to automatically analyze your existing contracts and operating agreements, identifying whether your current voting thresholds comply with state law or if you are inadvertently exposed to the default "unanimous consent" trap. By surfacing these risks before you initiate a sale, TermScore ensures your business operations remain legally sound and protected from litigation.