When forming a limited liability company (LLC), one of the essential documents that you need to create is an operating agreement. This document outlines the rules and regulations that govern how the LLC will operate and the responsibilities of its members.
While it`s not required by law to have an operating agreement, it`s highly recommended. Having one in place can help protect the LLC`s limited liability status, prevent disputes among members, and ensure that everyone is on the same page when it comes to managing and running the business.
But what should an operating agreement include? Here`s a sample of a basic operating agreement for an LLC:
1. Name and Purpose
This section should include the full legal name of the LLC and a brief description of its purpose. For example, “The purpose of this LLC is to provide marketing services to small businesses.”
2. Formation and Term
Here, you`ll outline the date that the LLC was formed and how long it will last. Most LLCs are formed with a perpetual duration unless otherwise specified.
3. Management and Voting
This section explains how the LLC will be managed and how decisions will be made. You`ll need to specify whether the LLC will be managed by its members (member-managed) or by an appointed manager (manager-managed). You`ll also need to outline how members will vote on important decisions, such as admitting new members, buying or selling assets, or changing the LLC`s operating agreement.
4. Members and Capital Contributions
This section lists the names of all LLC members and their capital contributions. You`ll need to specify the amount of money, property, or services that each member is contributing to the LLC.
5. Allocation of Profits and Losses
This section outlines how profits and losses will be distributed among the LLC members. You can choose to allocate profits and losses equally among all members, or you can assign different percentages based on each member`s contribution to the LLC.
6. Transfer of Membership Interests
This section outlines the process for transferring ownership of membership interests in the LLC. You`ll need to specify whether members are allowed to sell or transfer their interests, and if so, how the process will work.
7. Dissolution and Liquidation
This section explains how the LLC will be dissolved and its assets liquidated if the business is no longer profitable or if the members decide to terminate the LLC. You`ll need to outline the process for distributing the remaining assets among the members.
While this is just a basic sample of an operating agreement for an LLC, it should give you a good idea of what should be included. As with any legal document, it`s highly recommended that you consult with an attorney to ensure that your operating agreement complies with your state`s laws and accurately reflects your LLC`s needs and goals.