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Once you've created your Limited Liability Company, you can use an LLC Operating Agreement to define your organization's operating terms and help protect your legal rights and responsibilities. With a written record outlining your company's management policies and procedures, you'll be ready to get down to business.
Looking to start an Limited Liability Company? We can help. Answer a few simple questions and we can help you start an LLC today.
Use an LLC Operating Agreement if:
You're ready to form an LLC and you want to define its business terms.
You've already formed an LLC but don't yet have an operating agreement.
Setting up your small business as an LLC is a smart first step. But what comes next? Though the rules in every state are different, LLC’s enjoy flexibility their corporate cousins do not. The rules for S-Corps, C-Corps, and especially Non-Profits are much stricter, due to stock concerns for the former and enhanced government oversight for the latter.
The best way to really hammer out the way your LLC will run is with an LLC Operating Agreement. Here are some things you’ll want to define so that your unique business can run the way you want it to.
LLC Purpose and Details:
Firstly, you’ll want to note what the purpose of your LLC is, be it selling auto parts, distributing bagels, or consulting Fortune 500 companies. You’ll also fill out basic information, like where your LLC is located and what its phone number is.
Your LLC Operating Agreement allows you to define the roles each of your members will play in the funding of your business, as well as their day-to-day duties.
One advantage an LLC has is that you can define this as you see fit. Say, for example, one LLC manager is going to do half the work but only put in 10% of the seed money. You can note this in your operating agreement and determine what share of the business this person owns, based on the consensus you and your fellow managers come up with.
If it’s a single-person LLC, simply note that there’s one manager and there will be no reason to split voting or accounting duties.
First, you’ll want to note who is keeping the books in your LLC Operating Agreement. This person will be responsible for seeing that profits are distributed equitably. You can also have give this manager check writing privileges and decide when your fiscal year begins and ends.
Furthermore, you’ll want to do some sort of regular accounting, so our step-by-step interview will prompt you to create a time period. Some LLCs may want to do a deep dive into their books every three months; others may wait years. It’s up to you.
Member Withdrawal and Dissolution:
Since LLCs don’t have shareholders, the decisions about how to deal with an LLC member quitting is one you can detail in your LLC Operating Agreement. Many LLCs choose to allow the remaining members the option of purchasing the departing member’s shares of the company, either in a lump sum or as installments. Whether you choose to replace this member is also up to you.
In the event you and your co-members choose to dissolve your LLC, you can decide exactly how you’d like this process to play out. Do members get paid out according to their profit sharing? To the work done? This is up to you and the other members of your LLC.
Other LLC Documents
An LLC Operating Agreement is a great step to take right before or soon after you form an LLC. But in the course of running your business, you’ll need more. Here are some popular documents LLCs often need:
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Copyright 2015 Rocket Lawyer Incorporated. Rocket Lawyer provides information and software only.
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