We get it. You’re starting a business, you’re watching your budget, and ChatGPT just handed you a ten-page operating agreement in thirty seconds. It looks professional. It has all the right sections. Why pay an attorney when the work already seems done?
That reasoning makes sense on the surface. But after reviewing enough of these documents, we can tell you: the surface is usually where the problems end.
AI Gets the Surface Right
A ChatGPT operating agreement will look like a real operating agreement. It will have sections, use correct legal terminology, and cover the obvious ground: LLC name, members, ownership percentages, basic profit distribution. For someone who’s never seen one before, it can feel complete. That’s the problem.
It looks finished when it usually isn’t.
What’s Almost Always Missing
Generic language doesn’t just leave things vague, it defaults to something. Specifically, it defaults to whatever your state’s LLC act says when the agreement is silent. Those statutory defaults might be fine for your situation. They might also be completely wrong for it. The document won’t tell you which.
Here’s what we routinely find missing or undercooked in AI-generated agreements:
- Member exits and buy-outs. What happens when someone wants to leave? What price? Who decides? How is it funded? Silence here turns a business transition into a dispute.
- Death or incapacity. If a member dies, who inherits their interest? Can that person vote? Can they demand a distribution? In most states, the statutory default isn’t what small business owners would actually want.
- Deadlock provisions. In a 50/50 LLC, what happens when you and your partner genuinely cannot agree? Without a mechanism, mediation, a buyout trigger, anything, your options are litigation or dissolution.
- Management authority. Who can sign contracts? Take on debt? Hire employees? When this isn’t clear, it becomes the source of disputes, especially once the relationship starts to strain.
- Capital contributions and dilution. What if the business needs more money and one member can’t contribute? Does their ownership percentage change? Under what terms? Partnerships fall apart over exactly this.
The False Sense of Security
This is what concerns us most. When clients say they have an operating agreement in place, there’s often real relief in how they say it. The box is checked. The business is protected.
But “having a document” and “having protection” are not the same thing. A document that looks complete can still leave you fully exposed to the scenarios that actually matter. And in one specific way, that’s worse than having nothing: when you know you don’t have an agreement, you know you need to deal with it. When you think you do, you stop thinking about it.
We’ve seen this play out in litigation. It’s not a pleasant conversation to have with a client after the fact.
What AI Can’t Do
AI can produce language. What it can’t do is understand your situation. It doesn’t know that one of your members has a history of financial instability. It doesn’t know you’re planning to bring in an investor in 18 months. It doesn’t know the informal understanding you and your partners reached before anything was put in writing, and whether that understanding is actually in the document.
Legal drafting at its best translates real relationships and real intentions into language that holds up years later under circumstances you didn’t anticipate. That takes judgment and conversation. Not pattern matching.
How to Use AI Responsibly Here
Use it to educate yourself. Use it to generate a draft if you want something concrete to react to. Then sit down with a business attorney who practices in your state, not to rubber-stamp the output, but to review it critically and customize it for your actual situation.
The cost of getting this right upfront is almost always far less than the cost of sorting out a dispute later when the document has nothing useful to say.
Questions about your LLC or operating agreement? The attorneys at Shuler Law Firm work with business owners and startups on formation documents and business contracts. We’re glad to have a straightforward conversation about what you actually need.
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