Essentials of An Operating Agreement for a LLC

by | Jul 17, 2015 | Business

An LLC Operating Agreement, , is mandatory in many states and a recommend document that should be filed upon incorporation. The Operating Agreement is similar to Corporate Bylaws. The document contains details of the structure of the company and its  governance and details of the company members. The document contains their duties, responsibilities and their contact details. The corporate document also contains contribution by each of the member partners. Moreover, the document contains procedures that will be followed in case of a dispute among the partners and other contingent situations.

When you are thinking about forming an LLC, you need to think through the issues relating to governance and prepare an operating agreement for the company. The following information provides an overview of preparing an operating agreement for LLC.

Tip #1: Specific Information Must be Included the Operating Document

The first tip for preparing an LLC operating document is that it must contain specific information regarding the company. The document should contain information about the specific roles, duties, and profit shares of each of the members.

Tip #2: LLC Operating Document Must be Signed by All Concerned Personals

Another important tip is to make sure the LLC operating document is signed by the  officers and every member of the company. The document will not have any legal status if even one member of the LLC doesn’t sign the document.

Tip #3: Structure of the LLC Company Must be Specified

The operating agreement must specify organization structure of the LLC company. When it comes to structuring the operation, LLC have two options:

1. manager Managed Structure, or

2. member Managed Structure

Manager managed structure assigns certain individuals as managers who will have the authority to conduct the business on behalf of the LLC member. Member managed structure, on the other hand, is one in which the members themselves are responsible for managing and conducting the business.

Tip #4: Ownership and Amount Contributed by Each Partner must be Mentioned

Finally, the operating document should contain information about the ownership and amount contributed by each partner. This will help in avoiding dispute about the LLC ownership and contribution in the future. The document must be kept up to date as each partner leaves or enters the LLC.

The above tips will hopefully help you in preparing a comprehensive LLC operating agreement.

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