Operating Agreement LLC Template: Everything You Need to Know
An operating agreement LLC template is highly recommended when creating a business. 3 min read
2. Limited Liability Company
3. LLC Membership
4. The Steps to Form an LLC
5. Things in Operating Agreement
Operating Agreement LLC Template
An operating agreement LLC template is highly recommended when creating a business. An operating agreement dictates how a limited liability company manages the business and its operations. It’s a legal document, and many states consider them governing documents, so using a template is a good way to make sure you get the format right.
Limited Liability Company
An LLC is a hybrid structure that combines the tax benefits of a sole proprietorship or partnership with a corporation’s legal benefits. This structure protects the members of the LLC from liability in regards to the legal obligations and company’s debt.
Owning part of an LLC makes you a member of an LLC. Actually, a member can be an individual or a a corporation. Capital contributions must be made by a member. This can be money, services or property made in exchange for the corporation. Each member of a LLC has ownership of a percentage of the company.
The Steps to Form an LLC
1. Choose a State
Selecting a state is an important decision. Some states are popular due to their tax environment. Businesses often find Nevada, Wyoming, and Delaware to be favorable to their business in this manner. If your business is very local, then it’s best to register within the state where you conduct that business.
However, if the business is internet based, then you can research which state is best for the business model. You will need a registered agent that is authorized to do business within the state in which you incorporate if it’s not the state in which you live.
There are professional services that can act as registered agents for a reasonable cost.
2. Select a Name
There is much to consider when deciding on what to name your business. Research what names have already been taken in your state. In almost every state, there is a database that shows the names of already registered businesses. For example, in Illinois, the Secretary of State has a database that lists every business registered in the state.
3. Registered Agent
As mentioned earlier, an agent must be registered who’s able to act on behalf of the LLC within the state.
Filing for an LLC is different in every state. However, almost every one requires you to file articles of organization.
5. Write an Operating Agreement
An operating agreement is not required but highly recommended.
However, each member of the LLC should have a copy of the operating agreement.
The operating agreement is a legal document which details how the LLC manages the business, how decisions are made, and how the LLC should be dissolved. While an LLC is not required to have an operating agreement in any state in the United States, it is still very important.
It is the legal document that governs your limited liability company.
Even if you are the sole owner of a LLC an operating agreement is a good idea. It is an outline of how you will add members in the future. It is even more important when there are multiple members of the LLC.
Things in Operating Agreement
- Limited Liability Company Name and Address
- Articles of Organization
- Registered Agent and registered offices of the LLC
- Term of the LLC (if applicable)
- Member voting rights
- Business Continuity plan if a member passes away
- Business reason for the LLC
- Principal place that business will be conducted
- Initial contributions
- How profits and losses will be handled
- Distributions and how they will be made
- How the company will be run
- Specific powers of managers and members
- Management fees
- Member’s assignments of rights
It is best to address possible issues before they come up. For example, if a member passes away, it’s best if your operating agreement covers how the business will handle it. It clarifies for all of the members what their roles and responsibilities will be for the members.
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