Most members get along. Most managers live up to the LLC’s standards. Most LLCs hum-along just fine. The chances of harmony increase when the members communicate constantly and effectively, communicate their expectations, and are respectful.
But every now and then the LLC can’t make up its mind. The members may not agree on a matter. A manager might not live up to the LLC’s standards. A member might breach the operating agreement or the law. When any of this happens, your operating agreement tells you how to resolve the dispute.
The first step is to try to resolve things on your own. If this doesn’t work, then you may try to resolve things through mediation. If that doesn’t work, then you have to file the matter in court. If you waived your right to a jury trial in the operating agreement, a judge will decide the matter for you. If you didn’t waive this right, then a jury will decide the matter. You may also agree to arbitrate the dispute.
If you’re a manager and don’t live up to the LLC’s standards, then you’re personally liable to the other members for any damages they incur by your failure. If you’re a member or manager and breach the operating agreement or the law, then you’re also personally liable to the other members for the breach. The LLC can look into purchasing insurance to cover you as a member or manager for these claims.
Even though you’re a member or manager in an LLC, someone outside of the LLC can still name you personally in a lawsuit. You’ll have to pay for your defense and any judgment, unless the members agree to pay for these. You can ask the LLC to advance your litigation expenses for these claims.