This is the sixth in a series discussing eight bad “D”s to consider when drafting an operating agreement for an LLC.
When I use the word “drugs”, I’m referring to anything of an addictive nature, such as prescription or nonprescription drugs and alcohol. It can include any addictive behavior that is detrimental to the person or the business. There needs to be language in an LLC operating agreement as to what happens when one person becomes an addict and is no longer acting in a responsible manner, whether that person is a member-employee or whether that person has inherited a membership interest in the LLC. You don’t want to continue to fund an addictive behavior that is detrimental to the life and interests of that person.
Does the LLC have the resources available to pay for an inpatient treatment program? Does the LLC have specific provisions in the operating agreement as to how power and authority are taken away from the person with an addiction? These are things that need to be thought through.
The most important advice I can give you regarding this bad “D” is that you not think that this will never happen to you or any of the other members in the LLC, because it usually happens to those who thought it couldn’t happen to them.