If you’ve decided that an LLC was the right business formation for you and if you’ve gone ahead and done the necessary paperwork for your state, you may be wondering, “What’s next?” You’ve taken the first step, sure, but to keep your LLC in good standing, there’s one very important document you need to complete. That document? An LLC Operating Agreement.

First off, know that many states don’t require you to have create an LLC Operating Agreement; you can read which states do here. But just because it isn’t expressly required doesn’t mean you should avoid it. Operating Agreements solidify the structure of your company, are important in protecting your limited liability status, and, perhaps most importantly, they create the rules by which you’ll govern your company. Let’s break those down, quickly.

Customize Your Business Structure

One great advantage of having an LLC is choosing how you’ll split up profit, work-load, distribution of shares and more. In more rigid structures like S-Corps or C-Corps, you have less flexibility to choose the roles and rights of each business owner.

For example, in a C-Corp, if you’ve invested 20% of the capital in the company, you’re likely going to receive 20% of the profits or losses. In an LLC, you can set this up differently.

Say that our hypothetical 20% owner actually does 80% of the work, whereas her partner invested 80% but does only 20% of the work. In their Operating Agreement, these partners could choose to split the profits and losses 50%.

Guard Your Limited Liability

LLCs, especially one-person LLCs, are given much more respect by courts if they’ve created an LLC Operating Agreement. The document shows you’ve put time and thought into your company’s structure and rules and aren’t just operating by the seat of your pants. Without one, a court can sometimes view your business as something more akin to a partnership or sole proprietorship and, thus, you can occasionally be held personally liable for debts and issues down the line.

Avoid Your State’s Default Rules

No matter what you’re buying, selling, or trading, your company is unique. You want the ability to shape your rules and roles to fit the goals and hopes you have. An LLC Operating Agreement allows you to do so. If you neglect to make one, not only will you find it harder to protect your limited liability status, but you’ll also end up being governed by the generic rules in your state. Avoid this by simply making an Operating Agreement. Want to choose who votes on management decisions? How ownership is transitioned? How many shares each owner gets? These choices and more are made by completing your LLC Operating Agreement.