The Agreement Names the Owner as Member and Manager — With No Successor Named
This is the most common problem. The operating agreement names the owner personally as the sole member and manager. There is no successor member. There is no successor manager. There is no process for determining who steps into either role when the owner cannot continue.
When the owner dies or is incapacitated, the operating agreement provides no guidance. The Georgia probate court — not the family, not the business partners, not the operating agreement — determines who manages the business and what authority they have. That determination takes months and may not produce the outcome anyone wanted.
The fix requires two coordinated changes: (1) an amendment naming the revocable living trust as the successor member, and (2) an amendment naming the successor trustee as the successor manager with specific authority to continue operations, sign contracts, and make management decisions from day one.
The Agreement Requires Unanimous Consent for Transfers — Including Trust Transfers
Many Georgia operating agreements include a transfer restriction: membership interests cannot be transferred without unanimous consent of all members. This provision protects co-owners from having a stranger forced on them as a new partner. It is a reasonable provision.
The problem arises when the owner creates a revocable living trust and wants to transfer the LLC membership interest into it as part of their estate plan. The trust transfer is technically a membership transfer — and it triggers the unanimous consent requirement. If a co-owner refuses consent (or is unavailable), the transfer into the trust cannot happen. The LLC interest stays in the owner’s personal name, goes through probate when the owner dies, and defeats the purpose of the trust entirely.
The fix: add a carve-out for transfers to the owner’s revocable living trust. The carve-out should specifically state that a transfer to a trust of which the owner is both the trustee and the primary beneficiary does not require consent and does not constitute a prohibited transfer.
The Agreement Has a Dissolution Clause That Triggers on Member Death
Some older Georgia operating agreements — especially those drafted before 2014 — include a provision stating that the LLC dissolves upon the death of a member. This clause was based on older partnership law and is inconsistent with Georgia’s current LLC statute, which provides for continuation by default.
If your operating agreement contains a dissolution-on-death clause and has never been amended, the LLC may be required to wind up and dissolve when the owner dies — regardless of how much value the business has, regardless of what the family wants, and regardless of whether a trust is in place to receive the membership interest. A trust that receives an interest in a dissolving LLC holds a liquidation claim, not an operating business.
This clause must be identified and removed. It is the single most dangerous provision in Georgia operating agreements drafted before 2014.
The Agreement Addresses Management After Death — But Not During Incapacity
Even operating agreements that have been updated for succession planning often address death but not incapacity. They name a successor member for when the owner dies. They say nothing about who manages the business if the owner has a stroke, suffers a serious accident, or becomes cognitively impaired while still alive.
A durable power of attorney gives an agent authority over the owner’s personal financial matters. It does not automatically extend to LLC management unless the operating agreement specifically grants it. Georgia courts do not automatically appoint family members as LLC managers during a living owner’s incapacity — a guardianship or conservatorship proceeding is required, and it takes months.
The fix: add a specific incapacity provision naming who has management authority while the owner is alive but cannot act, what standard defines incapacity (typically a physician’s determination), and what authority the interim manager has during the incapacity period.
The Agreement Was Drafted for Two Owners — Now the Business Has Three
Business ownership changes over time. A business that started with two owners may now have three. A co-owner may have left and been replaced. A key employee may have been given equity. In each case, the operating agreement may not reflect the current ownership structure.
An operating agreement that names the wrong owners is not a technical oversight — it is a legal problem. Voting rights, distribution percentages, buyout provisions, and management authority are all defined by reference to the named members. An unnamed member has rights under Georgia statute but may not have the specific rights the parties intended. A member who is named but no longer an owner may appear to have rights they should not have.
Every ownership change requires a formal amendment to the operating agreement. An email agreement or handshake deal is not sufficient. If the ownership of your LLC has changed since the agreement was last updated, the agreement needs to be amended now — not at the next triggering event.
The Agreement Has Never Been Updated Since Formation
The most common operating agreement problem in Georgia is the simplest: the agreement was drafted at formation, no one has looked at it since, and the business has changed significantly since then. The owner’s family situation changed. The business structure changed. New assets were acquired. A buy-sell agreement was signed without coordinating with the operating agreement. The trust was created but the operating agreement still names the owner personally.
A formation-era operating agreement for a business that has been operating for more than three years should be assumed to have problems until reviewed. The review should check for: successor member and manager provisions, trust transfer carve-outs, dissolution clauses, incapacity provisions, buy-sell agreement consistency, and current ownership accuracy.
See why Georgia business succession plans fail for the full list of coordination failures that turn valid documents into inoperative plans.
