What's in the LLC Operating Agreement?

The operating agreement is the legal document a co-owner signs at closing. It governs how the home works for as long as anyone owns a stake. The dues structure, the scheduling rules and their limits, the sale process, the default scenarios, and the voting thresholds all live there.

Most buyers don't read it carefully. The ones who do ask the same six questions.

How much will dues cost, and how can they change?
Will I get the time I'm promised?
Can I sell my stake when I want to?
What happens if I die, divorce, or can't afford the dues?
Who makes decisions, and how can the rules change?
What if the operator goes out of business?

This article walks through each one. By the end, a reader can pick up an operating agreement, know what to look for, and ask the operator the right questions before signing.

1. How much will dues cost, and how can they change?

Annual dues are the recurring cost of ownership. They cover property tax, insurance, utilities, property management, the reserve fund for future repairs, and routine maintenance. Major projects, like a new roof or a furniture refresh, are typically funded through a special assessment voted on separately.

What matters is not the starting number but how it can grow. The operating agreement should specify how dues are recalculated each year. Common patterns include a CPI-based adjustment, a fixed percentage cap that requires a vote to exceed, or operator discretion. A buyer should know which pattern this home uses and how special assessments get approved. Dues that can rise without a cap or a vote can become a slow squeeze.

2. Will I get the time I'm promised?

Scheduling rules are how a buyer's usage gets enforced, and they have to be in writing that every owner signs. If the rules live only in the operator's marketing materials, they are not enforceable.

That doesn't mean every number has to sit in the operating agreement. On a Klasma home, the operating agreement holds the principles and the limits: time is counted in nights, each owner's allowance follows their percentage of the home, holidays rotate, and each setting has a range it must stay inside. The settings themselves, like the booking window or the minimum stay, live in a locked, versioned configuration in Klasma that the agreement points to. Every change creates a new version with a record of what changed. A change inside the limits comes with 30 days' notice and never touches a reservation already made. A change outside the limits, or one that moves nights between owners, takes an owner vote. The point is that the home can adjust a setting without rewriting a legal document, and no owner's allocation can change without the owners agreeing.

A buyer should match the salesperson's pitch against the documents line by line. The annual allowance, how holidays are allocated, the booking window, the guest policy, and how each of them can change should all be in writing. For more on how the system works in practice, see How does scheduling work with other owners?.

3. Can I sell my stake when I want to?

The operating agreement governs every part of selling: the right of first refusal that gives existing owners the first look, any minimum hold period, the transfer fees, the marketing process, and any restrictions on who can buy a stake. Some operators screen new buyers for financial qualifications.

A buyer should look for three things. First, the right-of-first-refusal terms: how long the window is and how the price is set. Second, any minimum hold period before a stake can be listed. Third, the transfer rules: whether the stake can move to a trust, a spouse, or an heir without triggering a sale. For the full landscape of resale, including the three models operators use, see How does resale work?.

4. What happens if I die, divorce, or can't afford the dues?

This is the section most buyers skip and most lawyers focus on.

Death. The operating agreement should specify whether a stake passes to heirs automatically, whether the LLC has the right to buy it back at a stated price, or whether the cohort gets a right of first refusal that triggers on death.

Divorce. If a court orders the sale of marital property, the operating agreement should specify whether the cohort gets first look, whether a forced external sale is allowed, and how the price is determined.

Financial hardship. If an owner cannot pay dues, the operating agreement should specify a cure period and what happens if the cure fails. The most common remedy is a forced sale, with proceeds going first to unpaid dues and LLC costs, and the rest to the owner. A buyer should understand exactly what triggers a forced sale and on what timeline.

5. Who makes decisions, and how can the rules change?

The operating agreement separates decisions into categories. Routine operating decisions (paying a vendor, scheduling repairs) are usually delegated to the operator or a designated property manager. On a Klasma home, Klasma is the LLC's manager, and owners are notified of every expense. Significant decisions (raising dues above the cap, capital improvements, special assessments) require an owner vote. Amendments to the operating agreement itself usually require a higher threshold, sometimes unanimous consent.

A buyer should look for three things. First, what decisions require a vote and what threshold applies, like majority, supermajority, or unanimous, and whether votes count by person or by percentage of the home. On a Klasma home, votes count by percentage, and a supermajority is two-thirds. Second, what the amendment process looks like. Can the rules change later, and how? Third, the dispute resolution clause. When owners disagree, what is the process? Mediation, arbitration, and litigation each carry different costs and timelines, and the operating agreement should specify which path applies.

6. What if the operator goes out of business?

The home is owned by the LLC, not by the operator. If the operator goes out of business, the home does not. The owners still hold their stakes through the LLC, and the LLC still holds title to the property.

What changes is who runs the day-to-day. The operating agreement should specify how a successor operator gets selected, usually a vote of the existing owners, and what protections exist during the transition (continuity of insurance, property management contracts, banking relationships).

A buyer should look for two things. First, the successor-operator clause. Is the process clear? Who triggers it? What threshold of owners decides? Second, the LLC's independence from the operator's other operations. The LLC's bank accounts, insurance, and contracts should be in the LLC's name, not commingled with the operator's. Commingling makes recovery harder if the operator collapses.

What This Means for You

It's important that a buyer reads the full operating agreement before signing. The six questions above cover the parts that matter most. A buyer who can answer all six in writing is doing the work most buyers skip. The operating agreement is not light reading. It is the rules of the game for as long as anyone owns a stake. Reading it before signing is the cheapest insurance available.

Examples in this article are illustrative. Operating agreements vary by platform, property, and operator. Buyers should review the specific operating agreement for any home they are considering before signing.