LLC Operating Agreement is an agreement between the owners of the Limited Liability Company. No matter are you just starting an LLC; or it exists, but doesn't have a written document to define its goals, operating terms and rights and responsibilities between the owners. Every LLC Operating Agreement should cover some issues, including LLC purpose and details, roles of owners, withdrawal and dissolution, accounting, and any other area and topic owners find important.
This document can be written in different forms and it depends on the type of business, number of owners and their obligations, operation terms and all crucial information for the successful running of the company. However, there are some data that should be in every document, no matter of the form.
Every LLC Operating Agreement should include some basic information.
Step 1 First of all, there should be information about every member, from their name and other data, contribution, ownership percentage, sharing the profit and loss, rights and duties.
Step 2 Second important part are data about possible leaving off the LLC, how will assets be distributed if LLC is dissolved and can new members be accepted and under what circumstances.
Step 3 Another important part of this agreement is a deal about the management and how the decision will be made. It should also cover the accounting methods, annual report and other administration details.
Step 4 Finally, it has to cover the possible disputes solving and other data members find important.
There is no such as thing as a unique template for all LLC Operating Agreements. As a matter of facts, each agreement is different, since there are many elements that should be incorporated in a final draft of this agreement. However, there are some basics you should follow while creating it.
Step 1 Start the template by writing the date and place on the top of the template.
Step 2 State all signatories of the contract. It should include their general information such as name and address.
Step 3 State how much each of the parties contributed to the LLC and, based on that, what percentage of the company that person owns. State rights and duties of each party and the way profit or loss is shared.
Step 4 Write down under what circumstances a owner can leave the company or a new one can join, as well as what happens if a company is dissolved.
Step 5 State how a company will be managed and about the voting rights of all owners. It can include information about owners meetings and other information owners find important.
Step 6 Include administrative information, such as the accounting process, annual reports and other information owners will need.
Step 7 Finally, make sure to note how possible disputes can be solved.
Place line and signature lines on the bottom of the template. Make sure to leave enough space for all parties to sign.
Since this document is not an obligatory and it varies from a state to state, many people think there is no need to arrange relations between owners in some small business. However, it is highly recommended to do so, since this type of a document covers all the relations and things that can happen.
1 In some cases, it would be good to hire a professional to create a document or at least to check the template members created and says its professional opinion about conditions in a contract and possible problems with it.
2 Think twice before you write and sign an LLC Operating Agreement. It may not be obligatory, but once you sign it, it becomes obligatory. So, make sure to include all the important information, as well as all the possibilities. Well-written contract ensures there will be no disputes in the future.
3 If you are working with the pre-written template, make sure to read it carefully and cut out all the things you find unnecessary in your case. Also, add all the information you need. Remember, you can’t completely rely on a general template since every LLC Operating Agreement is unique and depends on a number of factors.