The LLC is the #1 Choice for Small Business Owners
   

Sample Operating Agreement

Must Be Customized Prior to Adopting
Upon formation, an LLC is just a shell entity and needs to adopt rules and processes for evidencing ownership and operational requirements. This is done via the adoption of an operating agreement LLC.
This agreement will contain instructions and directions for how the LLC becomes authorized to enter into transactions and how it will operate on a daily basis.
Every member, manager and officer must gain a practical understanding of how the business will be managed. If the specific matters are set forth properly in an operating agreement, everyone will be on the same page and this will prevent later problems and misunderstandings.
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"Setting Up Your LLC Operating Agreement"
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Each jurisdiction does include in its limited liability company laws, certain default operating provisions that will apply to an LLC in the event that a particular matter is not addressed in an operating agreement. Unfortunately, the laws do not address many of the major operational matters and sometimes, the ones that are included just do not make sense for a business. Do not rely on state rules when you can create the ones that make sense for your situation.
It is a smart business practice for owners of an LLC business to meet as soon after formation to work on putting a final operating agreement LLC together. One advantage under the laws is that a limited liability company is free to adopt its own set of rules based on business circumstances. Because small businesses can vary and have differing needs, this flexibility is one reason the LLC is so popular as a business vehicle.
Three Matters to Cover in an Operating Agreement LLC
While an operating agreement can be very simple or very complex, there are a few matters that should be addressed in every one of them.
The first matter is ownership. Every LLC should make clear how ownership is established and who owns what in the business. Believe it of not, ownership is one of the largest dispute matters that lead to costly litigation for small business. Avoid this fate by ensuring your document sufficiently outlines ownership matters.
Second, there should be a clear method of how the LLC business becomes authorized to transaction business. There are two general operational structures, member managed and manager managed. With member managed, the owners, called members, are active in managing the business. With manager managed, there is a separate governing body called a Board of Managers. Owners only have management authority if they are elected to serve as a manager.
After a structure is determined, voting requirements need to be spelled out in the document. Many businesses require that owners holding a majority of the ownership need to approve major business decisions, but this percentage can be higher or lower based on each situation.
Third, an operating agreement LLC should address distributions which is when an LLC is authorized to distribute profits of the business out to its members. This typically requires a vote by the members. However, some businesses will create provisional limitations when it is important for a business to conserve capital to grow or others will require mandatory distributions.

SUMMARY

Above is only a summary of three major matters. A standard document will cover many more matters and sometimes, with more complex businesses, this agreement can be hundreds of pages. Because of its importance, this is one area where hiring a lawyer to help is worth the expense.

State Specific LLC Operating Agreements

Model LLC Operating Agreements Available by Instant Download
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