Review 20 critical provisions in your LLC operating agreement or equity term sheet. Toggle each as Present, Not Present, or Not Sure to get your risk assessment.
Frequently Asked Questions
What are the most critical provisions to look for?
The five most critical: (1) Vesting schedule with clear forfeiture rules, (2) Distribution rights with defined allocation method, (3) Anti-dilution or preemptive rights, (4) Information and inspection rights, and (5) Tag-along rights in a company sale. Missing any of these is a significant red flag.
What does "Not Sure" mean for my risk score?
"Not Sure" items are scored as yellow warnings (1 point each) because ambiguity in legal agreements tends to favor the drafting party — typically the managing member or company. If you're not sure whether a provision exists, that itself suggests insufficient transparency or an agreement that's hard to understand, both of which are concerning.
How many red flags are too many?
Any single red flag warrants discussion, but 3 or more missing critical provisions (especially in the Ownership or Economic Rights categories) should be addressed before signing. A risk score above 17 indicates a deal with serious structural problems that likely need attorney intervention.
Can I fix red flags after I've already signed?
Yes, through amendments to the operating agreement, but you'll need the managing member's consent. Your leverage is lower after signing, which is why pre-signing review is so important. However, if you're still providing valuable services, you can sometimes negotiate amendments as part of a role expansion or contract renewal.
Is this scanner specific to LLCs?
The scanner is optimized for LLC operating agreements but the concepts apply to any equity-for-services arrangement. For C-Corps, substitute "bylaws/shareholder agreement" for "operating agreement" and "shares" for "units." The underlying protections (vesting, anti-dilution, information rights, exit provisions) are universal across entity types.