Is an Oral LLC Agreement Valid?
Unfortunately, the LLC laws of most states do validate oral llc agreements for a limited liability company. So, technically, an oral LLC agreement is valid.
There are some limitations under general contract law. For example, there is the concept of the statute of frauds which requires that certain agreements be in writing. A recent Delaware court case involved an oral LLC agreement and held it invalid not under the LLC laws but under the statute of frauds/contract rules.
Practically and legally speaking, an oral agreement governing the relationship between LLC members and the operational requirements of a business is just a recipe for disaster.
Just think about it. If there were ever a dispute or disagreement, then how can one side or the other prove what the actual agreement was between everyone? If it was oral, this means there are no documents or writings summarizing the final disposition.
You should NEVER have an oral LLC agreement. In fact, I strongly recommend that in your written LLC operating agreement, there be a provision that nothing oral can ever be a part of the LLC governance. Everything must be in writing.
The LLC agreement for your company provides the fundamental personality, rules and structure of the entire business. It is like the user manual for your business. Accordingly, the specific rules, provisions and processes should be spelled out and well documented.
