Limited Liability Company Operating Agreement

A Limited Liability Company operating agreement is a critical document that deals with your LLC ownership and the member duties. This agreement sets the operational and financial ways according to the needs of its members. It covers even the aspects like what will happen if one of your members leave the company. This agreement is important for your business so it should be created as soon as you form an LLC. Your agreement also comprises the following details:

• Names and Details of members
• Managment responsibilities
• Roles of officers
• Rules for operating
• Ownership rights
• Capital investment information
• Rules for interpretation and venue
• Profit distribution rules
• Process in the event of death, disability and dissolution

Operating Agreement protects your Assets

Some states do not require the Operating Agreement to create an LLC. But if you do not form the agreement, you might risk your business when involved in a legal battle. The court may ask for your Operating Agreement. Then you might have fewer protections if the court states that your LLC is not properly formed as you do not have the Operating Agreement. It can harm the personal assets of your members.

But when you have the Operating Agreement, you can prove to court that your LLC is legitimate and you are operating your business properly.

Internal Documents

These documents do not require to be mailed anywhere. You do not have to mail it to the State or to the IRS. You just have to keep a copy of it with your other business documents. That means it is strictly an ‘internal document’.

Purpose of the Operating Agreement

The purpose of the Operating Agreement is to know the ‘membership interest’. It is about knowing the members and the percentage that they own in LLC. It can also be referred as the way LLC is managed, the ways taxes are paid and the distribution of profit and losses among the members.

Your LLC can either be a single-member LLC (owned by a single person) or it can be a Multi-member LLC (owned by two or more people).

Requirements for Operating Agreement

Your Operating Agreement requires following basic information:

• The formation date of your LLC
• Name and address of your Registered Office and Registered Agent
• The general business purpose of your LLC
• Member percenatge of ownership
• Names and addresses of the members

You can also make changes in these, if required.

Making changes in your Operating Agreement

Forming a Limited Liability Company gives you the flexibility of managing your business. The Operating Agreement is a working document that allows changes in itself with the growth in your business. If you want simple changes like changing the address of your agent or the registered office, you need to revise the original document of Operating Agreement.

But if the changes are complex like one member purchases the shares of other member, you need to hire an attorney. Because these changes can have some negative impact if done incorrectly.

After making the changes, you have to print the new Operating Agreement. Then all members have to sign it. You must have the copies of all the versions of your Operating Agreement so that you know the history of changes uptill now.

Who you need to share your Operating Agreement with?

You may require to provide a copy of your Operating Agreement to:

• A lender if you are obtaining financing
• A title company if you are purchasing real estate
• Accounting and tax professionals for financial assistance
• Lawyers for legal advice
• Potential investors or partners who have an interest in your business

Download LLC Operating Agreement Template (Free)

Other than Nevada, no secretary of States’ office provide an LLC Operating Agreement. You can download (free) Operating Agreement by clicking here:

LLC Operating Agreement. (MS Word File)