Deadlock In LLCs

By: Washington State Business and Real Estate Lawyer David Tingstad

David TingstadThe IRS estimates that 25% of all LLCs consist of two members. Care should be taken to draft an LLC Agreement to avoid a deadlock between the members or managers. In Washington, our new default rule for voting of members is on a per member basis regardless of how much capital a member contributes. As a result, in the absence of an agreement to the contrary, a deadlock can arise in any situation where there is an even number of members. A deadlock between the members usually results in significant damage to the business of the LLC and can lead to expensive litigation involving judicial dissolution. You should have a written LLC Agreement that anticipates and resolves a deadlock before it arises. Common examples of deadlock resolution techniques include: the identification of a “tie breaker” to decide an issue, the appointment of an arbitrator, shotgun buy-sell and drag-along, tag-along, provisions.

If you are beginning an LLC or if you are a member of a deadlocked LLC, you should contact a lawyer at Beresford Booth immediately to take the necessary steps to protect your interest and your business.

Beresford Booth PLLC (425.329.7263), www.beresfordlaw.com

BERESFORD BOOTH PLLC has made this content available to the general public for informational purposes only. The information on this site is not intended to convey legal opinions or legal advice.

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