An operating agreement is a specific contract between a company's partners or members of a limited liability company (LLC) that outlines the operating procedures of the business. It is an important document that recognizes the rights and responsibilities of every member in the LLC and it often works similar to a corporate charter or bylaws. For businesses located in New York, it is important to understand the requirements for an operating agreement and the ways that the agreement is enforced.

When forming an LLC in New York, it is necessary for business owners to craft and execute an operating agreement. This document serves as the basic legal contract between members regarding the company's structure, decision-making process, and overall operations. The purpose of an operating agreement is to outline the principles of the LLC and to protect each member in the event of a dispute. Without this agreement, disputes that arise within the business may be difficult to resolve as the business partners would not have an outline of roles and responsibilities.

When creating an operating agreement, businesses in New York must consider several general provisions including the company’s ownership structure, the rights and responsibilities of members in the LLC, and the LLC's voting procedure. In addition, the operating agreement must include specific provisions for what occurs in the event of a member's death, retirement, or departure and what occurs during the dissolution of the business.

It is important to keep in mind that operating agreements are specific to the LLC and must be tailored to the nature of the business. Standard “fill-in-the-blank” operating agreements may not provide sufficient guidance for businesses with more complex needs. In order to ensure the security of the LLC and the rights of the members, New York businesses should assume the terms of their operating agreement will likely be closely examined by the state and courts in the event of a dispute. Accordingly, it is in the business's best interest to craft an agreement that meets the applicable legal requirements and adequately addresses any potential business issues.

While it is not required by the state, most LLCs benefit from employing counsel to help with the preparation of their operating agreement. An experienced lawyer can help business owners understand the necessary requirements, develop clear guidelines for decision-making and dispute resolution, and provide an authoritative opinion on the enforceability of the agreement. A well-crafted operating agreement can be an invaluable tool that provides members with the confidence to move forward with business operations and protect the LLC from costly disputes.

When creating an operating agreement for an LLC in New York, it is important to consider the various regulations and requirements put in place by the state. It is also in the best interest of the business to employ experienced counsel to ensure that the agreement adequately covers all of the desired provisions in order to protect the company and its members.


Operating Agreement,

New York Businesses,