3 Things Every Business Should Review in Their Operating Agreement This Year

An operating agreement is more than a formation document. It’s the framework for how your business runs, makes decisions, and navigates change. Yet, many agreements are written once and rarely revisited, even as the business evolves.

Whether you’re scaling, restructuring, onboarding new members, or simply preparing for what’s ahead, your operating agreement should reflect the current reality of your company and protect it from future risk.
Here are three key areas every business should review in their operating agreement this year:

1. Decision-Making Authority

Why it matters:
Unclear decision-making provisions can create confusion or conflict, especially during moments of high-stakes change. Whether it’s approving new expenditures, entering into contracts, or resolving disputes between members, your agreement should spell out who has the authority to act and how decisions are made.

What to check:

• Are voting thresholds clearly defined (for example, majority vs. unanimous)?
• Does the agreement account for decisions made in emergency or transitional circumstances?
• Are day-to-day operational powers clearly delegated?

When decision-making is vague, it can lead to unnecessary friction or even litigation. Revisiting this section ensures your leadership structure is aligned with your current needs and risk tolerance.

2. Member Contributions and Distributions

Why it matters:
As your company grows, so does the complexity of financial arrangements. It’s essential that your operating agreement accurately reflects how capital is contributed and how profits or losses are allocated.

What to check:

• Are initial and ongoing capital contributions well-documented?
• Does the agreement account for disproportionate ownership interests or profit-sharing arrangements?
• Are distribution procedures and timelines clear and current?

This section is often overlooked but plays a vital role in managing expectations, preventing disputes, and ensuring compliance with tax and financial reporting obligations.

3. Exit and Succession Provisions

Why it matters:
Life happens. Partners retire, exit, pass away, or want to sell their interests. If your operating agreement doesn’t clearly define what happens in these scenarios, it can leave your business exposed to disruption or unintended ownership transfers.

What to check:

• Is there a clear buy-sell provision in place?
• Does the agreement address death, disability, or voluntary withdrawal?
• Have you updated successor or transfer terms to reflect current ownership goals?

Planning ahead in this area protects the business, its remaining members, and the legacy you’ve built.

Your operating agreement should be a living document, responsive to the growth, shifts, and realities of your business. If it’s been more than a year since your last review, now is a good time to ensure it still aligns with your operations and goals.

At Galbut Beabeau, we routinely work with business owners and general counsel to review, revise, and strengthen governance documents like operating agreements. A thoughtful review now can prevent costly complications later.
If you have questions about your existing agreement or would like to schedule a review, our team is here to help. Contact us to schedule a consultation.

About Galbut Beabeau
Galbut Beabeau is a Phoenix-based business law firm serving clients across Arizona and beyond. For over 30 years, our attorneys have provided strategic counsel and skilled representation in business litigation, transactions, and dispute resolution. We are committed to delivering exceptional service, practical insight, and trusted advocacy to help our clients succeed.

Learn more at gb.law.