Businesses can be very hard to run, especially without a proper structure or protocol in place. Limited liability companies 🏢 are no different! They’re very popular because of the limited liability protection they offer, but this protection is best solidified by an LLC operating agreement 📄.
Whether for single-member LLCs or joint ventures, guiding business entity operations takes some paperwork. In this article, we’ll enlighten you about the LLC operating agreement📄, what it entails, and how it is written 😊. By getting this legal document right, you can go a long way.
What Is an LLC?
A limited liability company, popularly called an LLC, is a business entity or structure exclusive to the United States. This business structure provides protection for the business assets and the business owner. It does this by shielding them from any debt or personal liability incurred by the business. In other words, if someone sues the business, the owner’s personal assets won’t be affected.
By default rule, the formation of this business structure is the best of two worlds. It combines the features of a sole proprietorship or partnership with those of a corporation. Not only does it provide the limited liability protection of a corporation; it also provides the flow-through member taxation of a partnership. Cool, right😊?
What Is an LLC Operating Agreement?
An LLC operating agreement is a legal, internal document. It:
- Details the mode of operation of a limited liability company.
- Stipulates the roles and responsibilities of each member
- Outlines the financial decision-making process of the company
The rules for LLCs in California actually require an LLC operating agreement, although you don’t have to file it with the state. This applies whether you’re a single owner or part of a multi-member LLC.
Even if the law didn’t require an LLC operating agreement, we can’t overemphasize how important this document is. It’s as crucial as your articles of organization. Without the presence of an operating agreement, your limited liability company will be subject to state default rules 🤨.
An LLC operating agreement also sets your company up for success and scalability in the future should you add business partners. An oral agreement won’t cut it; you also have to set your governing rules and company affairs in writing in an LLC operating agreement. You can read more about the advantages of an LLC operating agreement here.
What Does an LLC Operating Agreement Entail?
A limited liability company operating agreement must be comprehensive enough to encapsulate your company’s whole modus operandi. Therefore, you should make sure to include the following in your agreement 📄 to property protect your business affairs.
Basic Information and Stats
- Introduction of the business and contact details such as the business address, email address, mailing address, and phone numbers. This includes contact information for your registered agent (this may be you). Be sure to mention the type of business structure here as well.
- Each member’s ownership percentage, ownership shares, and capital contributions.
- Allocation of profits and losses according to respective ownership shares and capital contributions.
- Duties and obligations of each member.
- The members’ voting rights (you can determine voting according to the percentage of ownership).
- Rules and regulations that will guide the company’s daily operations
- Accounting procedures
- Periodic meeting schedules
- Management and office designations
- Buy-sell or buy-out provisions. In other words, what happens when a member wants to leave or sell their shares? How will transitions of ownership rights take place? What also happens in the event of a member’s death? Outline these business decisions here.
- Dissolution (how will you divide profits and losses in the event of dissolution?)
How to Write an LLC Operating Agreement with Ian Corzine
Many people have problems creating an operating agreement for their limited liability company 🏢. This is mostly because they are confused as to what to include in this legal contract. Do you have this problem but don’t want to hire a business attorney? Not to worry! Ian Corzine is here for you 😊.
For an affordable amount, you can get a comprehensive custom LLC operating agreement template. This enables you to create your company’s operating agreement without leaving anything out. Basically, with our help, you can accomplish a lot. You can properly protect your limited liability status, avoid default laws for LLCs, and make sure your entire agreement is exactly right for your business.
As stated above, you can get a customized operating agreement template from us, but that is not all there is to Ian Corzine 😊! We also offer customized templates in various fields. Finally, you can reach out to us for consultation regarding brand protection. Our team of experts is always ready to help you meet your business goals!