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.
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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.
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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.
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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
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