Operating agreements: the finer points

[Daniel Zieno]

Hello BP friends,

I am forming a partnership with five other members and we are pooling capital, and plan to go into some buy and holds and grow a company.

We have discussed our operating agreement with an attorney who has been somewhat vague on what we should be deciding amongst ourselves on topics like treatment of partner’s capital (as loans or equity share on a specific deal) , voting structures, and the other things we need to decide to set the guard rails of how our business will operate.

We are looking for someone that has formed a private equity group or partnership in the past that may be able to tell us how you went about some of the things in your operating agreement, and corporate structure (we are planning to go with a Wyoming holding company at this time).

Let’s network! We are growing our network and would love to know other people who are in private equity or partnerships, we can reciprocate value with sharing our knowledge and combined experiences with you as the years go by. Investing is a team sport!

This could look like sharing an operating agreement with us, looking over the decisions we have to make and letting us know what you think, or even hopping on a call with us!

Best regards,

Dan Zieno

[Mitchell Zoll]

Who is meeting with the attorney and who is the attorney's client?  The attorney can't give advice to 5 people at once. Contract terms will always benefit one person or another, and the attorney is under a fiduciary duty to advise their client. If they don't know who that is, they can't give final recommendations.  And if the client is the entity, the individuals have to make these decisions and the attorney can't recommend one path over another. 

Choose one person to be the designated representative to meet with the attorney - alone - to make these decisions on behalf of the group.  Can't choose one person? Then you already have a problem with control (and you can see why you aren't getting final advice).