Does Your Business Need an Operating Agreement?

To ensure the legal operations and objectives of your LLC are handled accordingly, an operating agreement is your best option.

What is an operating agreement?

An operating agreement is a vital document used by LLCs that outlines and controls the internal operations of a business in a way that best suits the specific needs of business and its owners. The operating agreement is so essential because it outlines the desires of the owners regarding management, financial decisions, functional decisions, and rules and regulations within the business. Once all of the owners of the LLC sign the document, it is binding and works as the contract controlling the businesses functions.

Why is an operating agreement important to you?

Without an operating agreement, state default rules govern the LLC. Since state default rules are very general, and you may not be aware of the rules governing your state, it is not advisable to rely on state default rules to manage your agreement. Even if members in an LLC verbally agree to certain terms, without an operating agreement to verify those terms, state default rules may apply. The best way to handle conflict between members within a business is to have an operating agreement in place that members can refer back to. Miscommunication or misunderstandings can take place, make sure you have the proper agreement in place!

What can be included in an operating agreement?

This list is not only limited to what is below, but can include anything the owners agree to as long as it remains legal:

  1. Voting rights and responsibilities

  2. How ownership percentages are divided.

  3. Responsibilities and duties of owners

  4. Distribution of profits and losses

  5. Procedures for transferring interest in the event of death

  6. Buy or sell provisions

How can we help?

Here at K. J. Sanchez Law, P. A., we specialize in assisting entrepreneurs remain protected and reach their goals. We take our time with each client to create a specified plan of protection and walk you through any legal questions you may have!

Let us handle the legal part, and you focus on growing your business!

Call us today!

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