LLC Operating Agreements
Operating agreements are business contracts that describe the operations of a limited liability company and set terms and conditions agreed on between LLC owners. These agreements describe what happens during day-to-day operations, under special circumstances, explain member duties and responsibilities, and protect owners from various situations.
Each LLC operating agreement is unique since each business, and its circumstances are different and require different things..
Why Your LLC Needs an Operating Agreement
Most states do not require LLCs to have an operating agreement, but this does not mean they are not crucial for protecting your business. When your company does not have an LLC operating agreement, it will default to the state’s terms. For example, your state may require that profits be divided equally between owners. If you and the other owners want different things than what the state recommends, it is wise to have an agreement in place.
LLC operating agreements are essential even if the LLC has one owner.
Operating Agreements and State Law
Each state has specific language that is required for LLC operating agreements, and each agreement is different, but these sections apply to all states. It is essential to consult with an attorney or your state’s business division for specific requirements for operating agreements in your state.
What Terms Are Included in an Operating Agreement?
Operating agreements should include the following information:
- The name of the Limited Liability Company and may include different names, or doing business as.
- Length of time of the LLC.
- The formation date of the LLC.
- The address of the LLC and where all legal documents are sent.
- The purpose of the LLC and why it was formed.
- Members names and addresses.
- Members contributions of cash or property.
- Procedures for admitting new members into the LLC.
- Description of the board of managers.
- Whether the LLC is managed by a member or a manager
- Number of managers and qualification of managers
- Resignation or removal of managers, and vacancies.
- Restrictions on the authority of a manager.
- Fiduciary duties of managers.
- Description of when meetings can be held and how they will be recorded.
- Description of circumstances regarding termination of managers, or members and circumstances in which the LLC might be dissolved.
- A statement that the LLC is governed by the laws of the specifically named state.
- How the LLC operating agreement can be amended.
- Severability: If any provision of the operating agreement is found to be invalid, illegal or unenforceable, the remainder of the agreement is not affected and is still able to be enforced.
- Mediation and arbitration. Some agreements include terminology requiring mediation or arbitration instead of litigation in the case of contract disputes.
Preparing an Operating Agreement
It is wise to have an attorney in your state prepare your LLC operating agreement to ensure if meets all the state’s requirements and complies with state law. There are online resources available to create an LLC agreement, but it is not recommended.
Paul J. Burkhart
Paul J. Burkart can assist you and your business by writing an LLC operating agreement to protect all members of the LLC. Paul J. Burkhart is an experienced business attorney who can review your agreement and ensure it has the features you need for your business before you sign on the dotted line.
Our team assists both individuals, and business clients with all their legal needs, including business and Corporate Transactions, Business/Commercial and Civil Litigation, Real Estate, Intellectual Property, Family Law, and Estate Planning matters. We are a full-service private law firm ready to assist you with any request, large or small. Call 561-880-0155 or visit our website.
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