Can a California LLC Have an Oral Operating Agreement?

Question:  My California LLC has three members who never signed an Operating Agreement.  The members agree from time to time as to certain terms and conditions applicable to the LLC such as what actions the manager can take without the approval of all of the members.  If the members of a California limited liability company agree on an oral Operating Agreement is it legally enforceable?

Yes:  California RULLCA Section 17701.02(s) states:

“Operating agreement” means the agreement, whether or not referred to as an operating agreement and whether oral, in a record, implied, or in any combination thereof, of all the members of a limited liability company, including a sole member.”

Caution:  As LLC attorneys who have formed 4,400+ LLCs my father and I have seen too many disputes among members who never signed an Operating Agreement and who cannot agree on LLC issues.  LLC members who don’t have a signed Operating Agreement and rely instead on oral agreements are “cruisin” for a “bruisin.”  Oral agreements result in he said she said disputes among members.  If the members resort to litigation to settle a dispute it is a roll of the dice as to who the jury will believe.

If your California LLC does not have an Operating Agreement signed by all of the members then do yourself and the other members a big favor and arrange for all the members to sign a good, custom Operating Agreement drafted to comply with California’s new Revised Uniform Limited Liability Company Act that took effect on January 1, 2014.