|WHAT IS A LLC OPERATING AGREEMENT?
• Every limited liability company (“LLC”) should have an LLC Operating Agreement.
• The LLC Operating Agreement is the core document that is referred to when issues concerning the LLC need to be resolved.
• The LLC Operating Agreement is the most important document for your LLC.
• The LLC Operating Agreement reflects the agreement among the members with respect to the affairs and management of the LLC, essentially governing the relationship among the members of the LLC.
• It describes the business and economic arrangement of the members.
• The LLC Operating Agreement does not have to be filed with any state agency.
• All states will enforce valid Operating Agreements entered into among LLC members.
|WHY DO I NEED A LLC OPERATING AGREEMENT?
• By having an LLC Operating Agreement, the members will be provided with a clear set of rules that all members have agreed upon, greatly reducing the likelihood of disagreements between members in the future.
• Without the formality of an agreement, the basic operation of the LLC would be governed by state law, which may not be advantageous to the LLC, it members, or the business it conducts.
• Without an operating agreement, the owners will be poorly-equipped to settle misunderstandings over the operations, finances, and management of the LLC.
• Without the formality of an agreement, a single member LLC can closely resemble a sole proprietorship, which does not limit your personal liability for business debts of the LLC.
|WHEN SHOULD I GET AN OPERATING AGREEMENT?
• It is extremely important to get a well drafted Operating Agreement immediately upon forming your LLC.
• You may get an Operating Agreement prior to forming your LLC. In fact, attorneys suggest that owners agree on the business terms of their deal and draft and Operating Agreement prior to spending money on forming an LLC.
|HOW SHOULD AN LLC OPERATING AGREEMENT BE DRAFTED?
• The Operating Agreement should describe the business and economic arrangement of the members.
• In drafting a LLC Operating Agreement, the following general goals should be kept in mind:
•The Operating Agreement should instruct owners concerning the operating and management of the LLC.
•The Operating Agreement should address and resolve all issues concerning the members (legal, tax, and other).
•The Operating Agreement should be customized to the business and owners.
•The Operating Agreement should comply with all federal income tax laws and be consistent with the Articles of Organization and with mandatory state statutory rules
•The Operating Agreement should be clear, use clear language and should be understood by all the members