The operation of your limited liability entity is generally governed by two things: the statutes in your state pertaining to your type of entity, and your own management directive (e.g., partnership agreement, bylaws, or operating agreement, depending on the type of entity).
State statutes contain requirements for the formation, operation, and dissolution of limited liability entities. See, e.g., Title 7 of the Colorado Revised Statutes. However, the statutes generally provide limited liability entities with the ability to significantly customize their own operations. For instance, the state statute may define a quorum as simple majority unless otherwise determined by a corporation’s bylaws. Your bylaws may actually define a quorum as 75% of the voting shareholders.
The bottom line is that you need to follow your own customized management and governance documents. You should also periodically review and revise these documents as your business evolves. Remember, your governance documents are customizable, and they should work for your business!
A final note: if you are thinking to yourself, “gee, I don’t have governance documents for my business,” you should speak to an attorney. Having customized management and governance documents in place helps protect your limited liability status.
The law is always changing. We cannot guarantee that the information provided herein is current and accurate. Every situation is different. Do not refrain from seeking legal advice from a lawyer because of anything contained in this blog. Consult an attorney for individual legal advice regarding your own situation.