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What’s in the Perfect Operating Agreement Example for LLC?

Did you know you only need three documents to start an LLC? A limited liability company (LLC) doesn’t need a lot of documentsđź“‘ to start-up like other business structures. One of the three documents you’ll need is an operating agreement. An operating agreement example for LLC can help make this step much easier!

In this article, we will explain everything there is to know about an operating agreement example for LLC🙂. This includes some basic definitions, what you need to cover, and even a link to our own operating agreement example for LLC. Read on and learn!

What Is an LLC?

A limited liability company is a business structure that protects its owners and their assets from its debts and losses. The limited liability protection goes two ways:

  • The owners enjoy protection from the company’s liabilities
  • The business and its assets are protected from the owner’s liability.

The formation of a limited liability company combines the features of a corporation with that of a partnership and sole proprietorship. The LLC structure also has tax benefits for your business activities. 

The Three Documents Needed to Start an LLC

In our introduction, we stated that you need only three documents to start a limited liability company 🙂. These three documents are:

  • Articles of organization
  • Operating agreement
  • Employee identification number.

The only document you officially need to file to get an LLC running is the articles of organization đź‘Ť. You don’t have to file an operating agreement with the state. However, you need it to administer your business smoothly.

If the company wants to hire employees, file taxes, and complete other activities, you additionally need employee identification numbers. They can also come in handy if you need to participate in many other types of business activities.

What Is an Operating Agreement Example for LLC?

An LLC operating agreement is an important legal documentđź“‘ needed to form a limited liability company. Signing it makes it a binding document and heavy lifter with many roles.

What Does an Operating Agreement Example for LLC Do?
  • Serves as a governing document that will direct the internal operations of the company in a way that suits the owners.
  • Outlines the rules and regulations of the business
  • Guides any major business decision
  • Stipulates the roles of each business partner, member, and office in the company.
  • Helps in protecting the limited liability status of the business by distinguishing the company from a sole proprietorship or partnership. 
  • Helps the owners of the company to customize their own rules. this prevents the company from being subject to the state’s default rules. 

As you can see, the LLC operating agreement is very important to its establishment. It doesn’t matter if the LLC is a single or multi-member LLC; you still need one of these operating agreements!

Components of the Operating Agreement Example for LLC

An LLC operating agreement example must include quite a few elements to accomplish everything listed above. It should include the introduction of the company and its members. The company’s purpose and the decision-making method should also make the list. And don’t leave out formation details, accounting principles, and profit allocation methods!

Here are some of the basic components of a limited liability company operating agreement.

Introduction

In this section which opens the agreement, introduce the company and what it does. This section comprises names and basic company information needed for LLC formation and registered agents selection. In other words, it should include details like:

  • Legal company name
  • Business names or DBAs
  • Address of the company, mailing address, and its email address
  • Name of registered agent
  • Address of registered agent
  • Registered agent’s contact information
  • Members and manager’s contact information

Business Purpose/Statement of Intent

What’s the purpose of the business? This section introduces your company’s product. Basically, you can use it to introduce the services you will render. You can add your statement of intent in this section of your operating agreement.

The statement of intent states that the operating agreement you have prepared does not break the laws of the state in any way. This is also a chance to mention any intellectual property that you will use in the business. 

Business Duration

This section should state that the company will continue to do business perpetually. So, if the LLC is meant to execute a project, this is the right section to add that.

Rules and Regulations

Here, you’ll include the governing rules and regulations that guide the business. Not including them can subject your LLC to the state’s default rules. Above all, you don’t want that to happen. We know you want to be able to control your business!

Capital Contributions, Percentage of Ownership, Distribution of Profits, and Voting Rights

This section shows the members’ capital contribution. What each member donates as capital can determine ownership interest. Because capital contributions may determine voting rights and the share of profits, it’s a good idea to include them.

Meeting Schedules

Your LLC operating agreement should provide for the meeting schedule of members. The meeting schedules should also stipulate the time and date of the periodic meetings (weekly, bimonthly, or monthly).

Accounting Procedures

In this section, as you might expect, you’ll stipulate the accounting methods of the business. Therefore, this section is a must.

Taxation

The members’ share of the profit will determine their taxes as limited liability companies are disregarded entities. The operating agreement should therefore show the taxation method of the company.

Dissolution and Succession

This section outlines what will happen in the event of dissolution. In other words, should the members want to put an end to the business, the way to go about it will be provided in this section. It also stipulates what will happen should a member die and directs succession proceedings.

Use Our Operating Agreement Example for LLC

We understand that you may need some help! Therefore, for the best possible result for your business, you can obtain a custom operating agreement template from us at an affordable price. This helps you to ensure that your operating agreement misses nothing.

Should you have any questions concerning this topic, feel free to go through related posts. In addition, don’t hesitate to reach out to us for consultations. Good luckđź’Ş!