California LLC Act

Under California’s LLC Act, transferring a membership interest conveys only economic rights to the assignee—voting, management participation, and inspection rights do not pass without unanimous member consent or an operating agreement provision that permits admission.

California LLCs default to member management, giving every member agency authority to bind the entity—a structure that works for active partnerships but creates coordination failures and liability exposure in entities with passive investors or outside equity. The choice of governance model also determines who owes fiduciary duties to whom and what the operating agreement must address at formation.

California’s LLC Act distinguishes between ordinary decisions approved by a majority of membership interests and fundamental changes that require unanimous member consent; the operating agreement can customize most thresholds, but certain protective rights belong to individual members and cannot be stripped without their agreement.

A member’s dissociation from a California LLC does not automatically dissolve the entity—but it triggers buyout rights and fiduciary duty questions that every operating agreement should address in advance.

Dissolution triggers winding up but not termination—the LLC continues to exist until winding up is complete, and managers retain limited authority to finalize the entity’s affairs.

The operating agreement is king—but the California LLC Act’s mandatory provisions, including the implied covenant of good faith, cannot be contracted away.

Before every distribution, run both the equity and balance sheet solvency tests and document the analysis—wrongful distributions expose managers and knowing recipients to personal liability.

The LLC name designator is mandatory and non-negotiable—omitting it creates real risk of personal liability and contract enforceability issues.

California LLC managers owe loyalty, care, and good faith to the entity—and unlike corporate directors, these duties can be tailored (but not eliminated) in the operating agreement.

The LLC liability shield is robust but not impenetrable—preserve it through proper capitalization, documentation, and entity separateness.