If you own or plan to form a limited liability company (LLC) in Washington, having a well-drafted Operating Agreement is crucial. Without one, you have no control over how voting power is distributed among members, which can lead to deadlocks, disputes, and unintended governance issues. The Washington Limited Liability Company Act (LLC Act) provides default rules for LLCs, but these may not align with your business needs—especially when it comes to decision-making authority. This article explains why an Operating Agreement is essential for managing voting power in your LLC and avoiding costly conflicts.

In the absence of an Operating Agreement, the LLC Act governs. Now to be clear, some provisions of the LLC Act govern all LLCs regardless of whether it has an Operating Agreement. For example, all LLCs must have a registered agent to accept service (e.g., complaints in a lawsuit). The LLC Act also protects the public by outlining the process for dissolving an LLC including ensuring that creditors are paid out before the members of an LLC.

But some sections of the LLC Act can be modified based on an agreement of the members. For most important matters, the LLC Act establishes default rules for an LLC that can be modified by an Operating Agreement. If there is no Operating Agreement then the default rules govern. One key concept for an Operating Agreement is voting power:

Unless an Operating Agreement states otherwise, each member gets one vote.  The LLC Act requires that a majority of members must vote, approve or consent to any action that requires member approval. Additionally, all members must vote to approve amending the certificate of incorporation, an LLC agreement, act in a way that contravenes the agreement, admit a new member or transfer a company interest, remove a member, compromise a members obligation to make a contribution or return cash, dissolve or convert the LLC, sell the LLC’s substantial property, or take any other action outside the ordinary course of business. RCW 25.15.121.

Let’s consider what this means. In a two member LLC, both parties must agree to any high-level action. This is because a majority is required for any action requiring member approval and unanimous consent is required for the decisions listed in the previous paragraph. Sometimes business partners do not always agree and if that’s the case it could deadlock an LLC.

Another example is when one member invests more money or takes a more active role in an LLC. Consider a three member LLC where member one puts in 50% of the money and does 50% of the work, with the other two contributing 25% of the money and the work. You may think that member one should be able to make the decisions as they contributed more to the LLC. However, if the Operating Agreement is silent on voting or nonexistent, then each of the three members gets an equal vote. An Operating Agreement can modify this to make it so that member one has twice the votes of the other members.

An Operating Agreement isn’t just a formality—it’s a vital tool for defining how your LLC operates, especially when it comes to voting power and decision-making. Without one, your business is subject to Washington’s default LLC laws, which may not reflect the contributions, responsibilities, or expectations of your members. Whether you’re forming a new LLC or already operating one without an agreement in place, taking the time to draft a clear and customized Operating Agreement can prevent future disputes and ensure smooth governance. Don’t leave your business decisions to default rules—take control with an Operating Agreement.