The document outlines key issues that business partners should discuss during the start-up phase of an LLC. These issues include: the purpose of forming the LLC; contributions from each partner; management and control structure; compensation; distributions; tax allocations; ownership transfers; liquidation process; dispute resolution; and entity maintenance responsibilities. Addressing these topics upfront can help reduce risks, increase efficiency, and provide clarity around expectations.

1. KEY ISSUES BUSINESS PARTNERS
SHOULD BE DISCUSSING DURING
START-UP PHASE
Eric C. Perkins Esq.
eric@ericperkinslaw.com
www.ericperkinslaw.com
(804) 205-5162
T he Virginia
L imited L iability C ompa ny

2. THE REALITY
The average business relationship
has a life span of 5 years; the
average startup small business today
has a life expectancy of 4 to 4.5
years.
Cressy, Robert. "Small business failure: failure to fund or failure to learn." Entrepreneurship, Small & Medium-Sized
Enterprises and The Macroeconomy (1999): 161-185.

3. THE PROBLEM OF DOING
NOTHING
Negative Perception
Risk of Litigation
Running a Race to the Bottom

4. THE BENEFITS OF PLANNING
AHEAD
Reducing Risk
Efficiency
Sleeping Easier

5. BUSINESS PURPOSE
Why are we forming this LLC?
Should the LLC be allowed to engage in any
lawful business, or should its purpose be
specifically limited?

6. CONTRIBUTIONS
Who is contributing what to the LLC (e.g.,
cash, property, services, etc.)?
What should happen if the LLC needs more
capital in the future?

7. MANAGEMENT AND CONTROL
Who will control the decision-making process
on a day-to-day basis?
What sort of voting rights should apply for
major business decisions—majority, super-
majority, unanimous approval?
Do we want to adopt a particular officer
structure similar to a corporation?
How can managers/officers be removed?

8. COMPENSATION
 Do we want to memorialize any special
compensation terms for an owner providing
services to the LLC?
Any special fees to owners or their affiliates?

9. DISTRIBUTIONS
How will cash available from business
operations or capital events (e.g., a sale of
assets or a refinance) be distributed?

10. TAX ALLOCATIONS
How will profits and losses be allocated among
the owners for tax purposes?

11. OWNERSHIP TRANSFERS
What sort of transfer restrictions do we want to
impose on one another to preserve the
integrity of the ownership group?
Do we want include succession planning
provisions to address what happens upon the
death, disability, or retirement of an owner?

12. LIQUIDATION
How do we want to handle the process of
dissolving and liquidating the business?

13. RESOLVING DISPUTES
How do we want to resolve disagreements that
arise among owners?
Litigation, arbitration, mediation, negotiation?

14. ENTITY MAINTENANCE
Who will serve as registered agent of the LLC
and coordinate payment of State Corporation
Commission annual fees, etc.?