What is an LLC Operating Agreement? (Get a Free Custom Operating Agreement) – Short Version


What is an LLC operating agreement? An LLC operating agreement is a foundational legal document that outlines the ownership and member duties of your limited liability company. Not
every state requires an operating agreement but they are highly
recommended. If you are a sole owner of an LLC creating an operating agreement
brings credibility to your business and helps ensure courts uphold your limited
liability status in the event of a lawsuit. If you have a multi-member LLC
the operating agreement will help prevent misunderstandings by setting
clear expectations about partner roles and responsibilities. Make sense? Let’s
look at the six key sections that should be present in a typical operating
agreement Article 1: Organization The first article deals with the creation of
the company when it was created, who members are, and the structure of the
ownership. Article 2: Management and Voting The second article establishes if
the company is managed by all of the members or by appointed managers and how
the company votes on issues that require a group decision. Article 3: Capital Contributions The third article addresses which members have given money to start the LLC, and how additional money will be raised by the members Article 4: Distributions The fourth article describes how the company’s profits and losses are shared among members. This might include money, physical property, or other business assets. Article 5: Membership Changes The fifth article describes the process for adding
or removing members, if and when members can transfer their ownership of the
company, what happens if a member dies and so on. Article 6: Dissolution This section of the operating agreement will explain the
circumstances in which the company may or must be dissolved. This is sometimes called winding up the affairs of the company. Following any major company
event such as adding or losing a member it is a good idea to review and consider
updating the operating agreement. It can be amended at any time with the consent
of all current members. To use our free templates to create an operating
agreement for your LLC follow the links in the description below

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