LLC With No Operating Agreement in California: The Default Rules That Decide Your Dispute

Last updated: October 2026

A California LLC that never signed an operating agreement is governed by the default rules of the Revised Uniform Limited Liability Company Act. By default the company is member-managed, each member has equal voting rights, acts outside the ordinary course need every member's consent, and distributions follow the value of each member's recorded contributions. Kolmogorov Law, P.C. litigates these disputes for members in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss a dispute in an LLC with no operating agreement.

Why this comes up so often

Two friends form an LLC online in an afternoon. One puts in the money, the other runs the business. Nobody drafts an operating agreement, or a template is downloaded and never signed. Three years later the business is worth something, and they disagree about who owns what, who can sign checks, and whether one of them can be removed.

I see this fact pattern constantly. The silent partner who funded the purchase assumes money bought control. The operating member assumes sweat equity bought a majority. Without an agreement, neither assumption is the law. The Corporations Code is.

The statute fills the gap

California's LLC act lets the operating agreement govern most relations among members, and where the agreement is silent, the statute supplies the rule. A verbal understanding can count as part of the operating agreement, but proving one in court is a fight over credibility, and the written default rules are what a judge starts from.

Who manages: member-managed by default

An LLC is member-managed unless its articles of organization state that it is manager-managed. (Corp. Code, § 17704.07, subd. (a).) In a member-managed LLC, management is vested in the members, and each member has equal rights in the management and conduct of the company's activities, including equal voting rights. (Corp. Code, § 17704.07, subd. (b)(1), (2).)

That is the rule that surprises people. Equal rights means the member who contributed ten percent of the capital has the same management vote as the member who contributed ninety, unless the articles or a written agreement say otherwise. The statute sets a separate default for member voting measured by profit interests in some contexts, and the two rules interact in ways that depend on what the articles say, which is why we read the filed articles first.

What needs everyone's consent

An act outside the ordinary course of the company's activities may be undertaken only with the consent of all members. (Corp. Code, § 17704.07, subd. (b)(4).) Selling the business, taking on a major loan, admitting a new member, or changing the company's line of business are the usual examples. A member who does any of those alone, in an LLC with no agreement, has acted without authority. That is often the core of the lawsuit.

In a manager-managed LLC, the default is different. A manager may be chosen by the consent of a majority of the members. A majority may also remove the manager at any time without cause, subject to any service contract. (Corp. Code, § 17704.07, subd. (c)(5).)

How money is shared

Distributions before dissolution follow the operating agreement, and where it is silent, they are made on the basis of the value, as stated in the company's required records, of the contributions received from each member. (Corp. Code, § 17704.04, subd. (a).) Not per head. Not by hours worked. By recorded contributions. And nobody has a right to a distribution before dissolution unless the company decides to make one. (Corp. Code, § 17704.04, subd. (b).)

Members in a no-agreement LLC rarely kept clean contribution records, so these cases turn on bank statements, tax returns, and the capital accounts on the K-1s. Those documents usually tell a clearer story than either member's memory.

Access to the books

A member has the right, on reasonable request and for a purpose reasonably related to the member's interest, to inspect and copy the company's required records during normal business hours. (Corp. Code, § 17704.10, subd. (b).) A member who has been cut off from the accounts and the books has a statutory remedy, and the court may award the member's attorney fees if the refusal was without justification. (Corp. Code, § 17704.10, subd. (g).) Our page on member access to books and records covers that process.

When the relationship cannot be saved

Any member may file an action for judicial dissolution. The court may order it where it is not reasonably practicable to carry on the business, or where management is deadlocked or subject to internal dissension. Persistent and pervasive fraud, mismanagement, or abuse of authority by those in control is another ground. (Corp. Code, § 17707.03, subd. (b).) The other members can avoid dissolution by buying the moving member's interest at fair market value, with the court appointing three appraisers if the parties cannot agree. (Corp. Code, § 17707.03, subd. (c).) That buyout mechanism is often where these cases end. See our guides on LLC dissolution and partnership buyouts.

What we do

We start with the filed articles, the tax returns, and the bank records, because those documents fix the default rules and the contribution history. Then we map the other side's conduct against the statute: who signed what without consent, who took distributions that did not follow the contribution shares, who shut whom out of the records. From there the claims are usually breach of fiduciary duty, an accounting, and, where it fits, dissolution with a buyout. Our partnership dispute page describes the practice; the fiduciary duty guide explains the duties members owe each other.

Where these cases are heard

Member disputes are filed in the Superior Court where the company does business: the Central Justice Center in Santa Ana for Orange County LLCs, the Stanley Mosk Courthouse for Los Angeles. Larger cases may be designated complex.

Frequently asked questions

Is an LLC valid in California without an operating agreement?

Yes. The LLC exists once the articles are filed. The operating agreement governs relations among members, and where there is none, the Corporations Code default rules apply.

Who controls an LLC with no operating agreement?

By default the members do, with equal management and voting rights, unless the articles designate the company as manager-managed. (Corp. Code, § 17704.07, subds. (a), (b).) Acts outside the ordinary course require every member's consent. (Corp. Code, § 17704.07, subd. (b)(4).)

How are profits split in an LLC with no operating agreement?

Distributions follow the recorded value of each member's contributions, not an equal split and not hours worked. (Corp. Code, § 17704.04, subd. (a).) The company's records and tax filings usually decide what those contributions were.

Can one member remove another without an operating agreement?

Not by a simple vote. The statute's removal rule applies to managers in a manager-managed LLC. (Corp. Code, § 17704.07, subd. (c)(5).) Removing a member generally takes a buyout agreement or a judicial dissolution proceeding with the statutory purchase option. (Corp. Code, § 17707.03.)

Does a verbal agreement count as an operating agreement?

It can, in part. The practical problem is proof. When the members disagree about what was said, the court will lean on the written default rules and the documents, so a member relying on an oral deal needs emails, texts, and conduct that back it up.

Talk to a California partnership and LLC dispute attorney

If your LLC has no operating agreement and your co-owner is making decisions alone, taking money, or shutting you out, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is at 327 Magnet, Irvine, CA 92618, and represents members and managers in Orange County, Los Angeles, and throughout California. See also our guide to shareholder and LLC member disputes.

This page provides general information about California law and is not legal advice. Outcomes depend on the articles of organization, the records, the members' conduct, and the court.