LLC Governing Documents: Everything You Need to Know
LLC governing documents are the official papers created during a business' formation.3 min read
LLC governing documents are the official papers created during a business' formation. As the term indicates, they help operate the business throughout its lifespan. The governing documents of a limited liability company (LLC) can be amended when the owners desire to do so, Handle and change them carefully, as they are a very important aspect of the business.
Importance of LLC Governing Documents
An LLC's governing documents play many roles, but one of the most important is registering the business. Some governing documents are required to be filed with the state in which the LLC plans to do business. As a business is getting started, the governing documents will lay out the basic plans and information for the company and its overall vision or reason for forming.
Any time a lawsuit comes up with a business, the governing documents can quickly come under scrutiny and, in some cases, actually work against the company. This is why it's important to take these documents seriously and make sure to follow their rules. LLCs are known for their protection of the assets of owners, or members. This protection is lost if the business is not operating according to its own governing documents, or if they don't exist.
What Are LLC Governing Documents?
You'll find both basic information and legalese in an LLC's governing documents. Here are the most common LLC governing documents:
- Articles of organization (also called certificate of formation, articles of formation, etc).
- Operating agreement.
- Minutes from the initial member meeting.
- Membership certificates (signed and issued).
- Registered agent agreement.
- Any deeds of ownership or otherwise for assets belonging to the LLC.
Articles of Organization
The articles of organization are the documents that an LLC must file with their state in order to register the business. These papers go by several different names. You can find out exactly how to file the articles of organization for your business by visiting the secretary of state website. You'll include basic information for your business so that it can legally operate in the state.
The kind of information usually included in articles of organization includes:
- Business name.
- The mission statement or statement of purpose for the business.
- The planned duration of the business (can be fixed or perpetual).
- Business address.
- Information for the registered agent.
- The management structure of the business (LLCs can be manager-managed or member-managed).
The best way to ensure that the articles of organization for your business are accurate and in good shape is to hire a business lawyer to draft the articles for you. Even if you feel confident that you can fill out the articles of organization yourself, it's a good idea to have a lawyer look them over before filing them with the state.
Filing articles of organization will cost a fee, but the amount varies depending on the state. Sometimes, if there's an error in your filings, you'll be required to refile and therefore pay the fee again. This is why a lawyer can come in handy.
When a business decides to create series LLCs, the articles of organization for that series and any other series created under the larger, parent LLC, must detail the relationship between each of the series. This is to ensure that the assets of each of the LLCs are protected from the others. Basically, you want to make sure that if one series LLC faces legal trouble, this won't affect the assets of the others in the series or the parent LLC.
An operating agreement for an LLC is not always required by the state, but it's still a very good idea to create one. LLCs with multiple members should use their operating agreement to make sure all members are in agreement with how the business will operate. The operating agreement for each LLC will look different depending on the specifics needs and goals of each business.
Operating agreements are not only ideal for laying out the daily operations for the business, but they also act as another way to help protect the business assets. The better the operating agreement, the more likely the LLC will maintain its liability protection during a lawsuit.
You'll likely find the following provisions in an LLC operating agreement:
- Member ownership percentages.
- Profit allocations.
- Member voting rights.
- Manager information and responsibilities.
- Member instructions.
- Member exiting procedures.
- LLC dissolution procedures.
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