If an LLC operating agreement permits a member to transfer its entire membership interest including governance and economics, what is the effect on default rules?

• A. Default rules always apply regardless of agreement
• B. Transfers require unanimous consent from all members
• C. The transfer provision overrides the default rules
• D. Governance rights cannot transfer, only economic rights

Answer: (C)

In LLC governance, the operating agreement can rewrite how membership interests move and what rights accompany them. If the agreement expressly allows a member to transfer the entire membership interest—including both governance and economics—the transfer provision controls. That means the default rules that would typically govern transfers do not apply to this situation; the contract’s terms determine the effect of the transfer. The transferee would take the rights and duties as set out in the agreement (subject to any admission procedures or ancillary provisions the agreement includes). Default rules apply only where there is no contrary provision.