Specific Provision Violations

Specific provision violations occur when parties involved in an LLC fail to adhere to the terms outlined in the operating agreement. These provisions typically detail the rights, responsibilities, and obligations of each party. Violations can range from failing to meet financial obligations to disregarding governance procedures.

Common Causes

  • Misinterpretation of contractual terms
  • Negligence in fulfilling contractual duties
  • Disagreements over the interpretation of provisions
  • Failure to update the operating agreement in line with changing circumstances
  • Deliberate disregard for contractual obligations

Procedural Breaches

Procedural breaches involve violations of established procedures and protocols outlined in the operating agreement. These breaches occur when parties fail to follow the proper steps in decision-making processes, meetings, or actions within the company.

Common Causes

  • Lack of understanding or awareness of procedural requirements
  • Rushed decision-making processes leading to oversight
  • Disagreements among members regarding procedural steps
  • Poor communication within the company regarding procedural changes
  • Intentional disregard for established procedures for personal gain

Scope of Authority Disputes

Scope of authority disputes arise when there is disagreement or confusion regarding the extent of power and decision-making authority granted to individuals or entities within the company’s operating agreement.

Common Causes

  • Ambiguity in the language of the operating agreement regarding authority delegation
  • Changes in personnel or management leading to shifts in perceived authority
  • Lack of clarity in defining decision-making boundaries
  • Differences in interpretation of authority provisions among members
  • Failure to regularly review and update authority allocations in the operating agreement


What constitutes a breach of an operating agreement?

Any violation of the terms, provisions, or procedures outlined in the operating agreement can constitute a breach.

How can breaches of specific provisions be prevented?

Regular review and understanding of the operating agreement, clear communication among members, and adherence to contractual obligations can help prevent breaches of specific provisions.

What steps can be taken to resolve procedural breaches?

Communication among members to address misunderstandings, clarification of procedural requirements, and adherence to established protocols can facilitate the resolution of procedural breaches.

How are scope of authority disputes typically resolved?

Through mediation, negotiation, or legal arbitration, parties can seek to clarify and resolve disagreements regarding the scope of authority outlined in the operating agreement.

Is it possible to amend an operating agreement to address breaches?

Yes, members can amend the operating agreement to clarify provisions, update procedures, or redefine authority allocations to prevent future breaches.

What are the consequences of failing to address breaches promptly?

Failure to address breaches promptly can lead to escalation of conflicts, erosion of trust among members, and potential legal consequences for the parties involved.

Can breaches of an operating agreement affect the company’s reputation?

Yes, public disclosure of breaches or legal disputes related to the operating agreement can damage the company’s reputation among stakeholders, investors, and customers.

Are there alternative dispute resolution methods for resolving operating agreement breaches?

Yes, alternative dispute resolution methods such as mediation or arbitration offer alternative avenues for resolving operating agreement breaches outside of traditional litigation.

How can parties prevent breaches from occurring in the first place?

Clear communication, regular review and updating of the operating agreement, adherence to contractual obligations, and proactive resolution of conflicts can help prevent breaches from occurring.