Share­hold­ers own cor­po­ra­tions. Part­ners own part­ner­ships. The sole pro­pri­etor owns a sole pro­pri­etor­ship. So who owns Mr. LLC? Mem­bers do.

When you first cre­ated Mr. LLC you iden­ti­fied its mem­bers. The mem­bers con­tributed money, ser­vices, promis­sory notes, or assets to Mr. LLC to become a mem­ber. They own Mr. LLC.

The mem­bers have con­trol over Mr. LLC accord­ing to the gov­er­nance pro­vi­sions in the oper­at­ing agree­ment and the Alaska LLC statutes or both. The mem­bers make all of Mr. LLC’s deci­sions or they del­e­gate the deci­sions to a man­ager. If the mem­bers del­e­gate deci­sions to a man­ager, they can reserve some of the deci­sions for them­selves. These are called mem­ber mat­ters and are nor­mally big deci­sions such as buy­ing or sell­ing expen­sive assets, sign­ing big con­tracts, hir­ing impor­tant employ­ees, merg­ing with another com­pany, doing yearly bud­gets, and other sim­i­lar decisions.

The mem­bers nor­mally make these big deci­sions by vot­ing. There are a num­ber of ways the mem­bers can vote. They can require a major­ity vote, unan­i­mous vote, or cer­tain per­cent­age of votes to make a deci­sion. They can give one vote to each mem­ber or they can give votes pro­por­tion­ate to the member’s ownership.

The mem­bers can also set up dif­fer­ent classes of mem­ber­ship where each mem­ber has dif­fer­ent rights. For exam­ple, some mem­bers may have gov­ern­ing rights while other mem­bers would have only a right to the profits.

Whether Mr. LLC suc­ceeds depends largely on its LLC mem­ber­ship. When you started Mr. LLC you got to choose Mr. LLC’s mem­bers. You might be the only mem­ber or your LLC might have mul­ti­ple mem­bers. In either case you know the peo­ple you’re going into busi­ness with when you started Mr. LLC.

But things might change as time goes on. A mem­ber might want to sell his inter­est. There is always the chance a mem­ber may die, become dis­abled, file for bank­ruptcy, resign, divorce, or any num­ber of things that change mem­ber­ship. If you don’t have an oper­at­ing agree­ment, then these events can change Mr. LLC in unex­pected ways.

That’s why you’ll want a good buy/sell agree­ment to set the trig­gers for the events such as rights of first refusal, the pur­chase price, and other clauses. We’ll talk more about these in the chap­ter on buy-sell agreements.