Why does our Operating Agreement have a Spousal Consent?

I recently received questions about whether and why Spousal Consents are necessary with respect to certain business-ownership agreements. Here is a summary of the most important points that you need to know.

California is a community property state. If, during marriage, an individual acquires an interest in a business, the individual’s spouse has a community-property interest in that business.

LLC Operating Agreements and corporate Shareholder Agreements often have restrictions on transfers of interests so that founders will not be forced to work with undesirable transferees. Those restrictions could be undercut, however, if an individual’s interest were transferred, by operation of law – such as in the event of divorce or death – to a spouse.

Accordingly, it is customary to have a spouse (or, similarly, a domestic partner) agree to the terms of the underlying agreement via a Spousal Consent. That way, the business and the other owners maximize the likelihood that they can enforce the transfer restrictions against the spouse.

A sample Spousal Consent is available as a Free Download on the Downloads page.

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Follow-up: A real-life example of an entrepreneur who lost half of his interest in a corporation because he failed to enter into a shareholder agreement, with spousal consent, that included share-transfer restrictions is available on Avvo.

Photo credit: Kostya Kisleyko via stock.xchng

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.