Operating Agreement

What is an LLC Operating Agreement?

An LLC operating agreement is a written agreement between members of an LLC (Limited Liability Company), which outlines the business’ purpose, as well as managerial roles and financial responsibilities.

Every LLC Operating Agreement Should Include:
LLC Name Articles of Organization Registered Agent Info
Duration of LLC Member Voting Rights Continuance of Company Through Death of Member
LLC Purpose Principal Address Addition of New Members
Initial Contributions Profit and Loss Distribution Daily Operations Overview
Powers of Managers and Members Record Maintenance Management Fees
Member Rights Member Withdrawal Dissolution

Do LLCs Need Operating Agreements?

No state requires an LLC to have an operating agreement, but if your LLC has more than one member, operating agreements are essential. Although the operating agreement is not filed with any state agency, if your LLC winds up in court, that document will prove applicable and may help to provide strong limited liability. The document will also be relied upon to resolve member disputes, account for initial contributions, and serve as an official record of how much of the company each member owns. Operating agreements are, in a word, important. This document should not be disregarded!

What Does an Operating Agreement Do?

An LLC operating agreement does the important job of outlining responsibilities in a LLC and outlines the general rules by which the members agree to operating the LLC. Below, you’ll find the most important things an LLC operating agreement does:

  1. Definition of Roles
    An operating agreement clearly and thoroughly defines who does what in the company. This creates order within the company, as it outlines who is responsible for what job.
  2. Conflict Resolution
    By outlining responsibilities, the operating agreement can be relied upon when members clash with each other. The operating agreement should also describe the voting rights of members, so the members know and agree at the outset, who can decide what and how will those decisions and votes take place.
  3. Continuance
    An LLC operating agreement not only outlines how decisions in the company are made, but what happens to the company upon the death of a member. This clause typically guides what happens to the deceased member’s interests, whether the surviving members can continue with the company, as well as whether new members can be admitted and what type of investment new members can put into the company.
  4. Limited Liability
    As a legal document, the operating agreement further helps to establish a separation between its members’ assets and the company assets as the document will outline what accounting methods the LLC uses, capital contributions, and display a general blueprint for how the company operates.
  5. Dissolution
    Should your company go out of business or need to shutter its doors, the operating agreement will cover how the company’s assets will be distributed and how any losses should be shared.

Operating Agreements with Every LLC

One of the biggest selling points of hiring IncFast to form an LLC for you is this: we include an operating agreement with every LLC we form. You could pay thousands to an attorney to draft one on your company’s behalf, but if you hire us, it’s just included. Why? Because we believe a company should not only be formed fast, but that as professionals, you can rest assured your company has been formed the right way and that you have everything you need to build a secure future.

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