Sample Bylaws For LLC: Everything You Need to Know
Sample bylaws for LLC should contain essential features, such as management structure and the roles and responsibilities of each LLC member. 3 min read
2. Operating Agreement Benefits
3. Operating Agreement Basics
Sample Bylaws for LLC
Sample bylaws for LLC should contain essential features, such as management structure and the roles and responsibilities of each LLC member. You should use an operating agreement in the following cases:
- You’re creating an LLC and wish to define business operations
- You just started an LLC and need to establish a management structure
In addition, operating agreements go by the following names:
- LLC bylaws
- LLC operations agreements
- LLC set up agreements
- LLC partnership agreements
When corporations abide by well-drafted bylaws, it prevents potential conflict and legal trouble in the future. Regarding LLCs, bylaws are also called operating agreements, and they should include detailed information. It is also a good idea to get help in drafting an agreement, especially if you have a large LLC or multiple members.
Operating Agreement Benefits
Operating agreements are not mandatory in most states, but you should create one to effectively manage your business. It is purely an internal document, and you do not have to file it with state authorities. Essentially, it is the primary document that governs your LLC. Moreover, operating agreements detail how members will be paid and the overall compensation model within the company.
The great thing is that there are no official rules in drafting an operating agreement, and such an agreement allows you to tailor your LLC without state interference.
The operating should not be confused with your articles of organization, which is the primary document that registers your LLC. You would file your articles of organization when you create the LLC and pay the necessary filing fees.
Also, state officials will not dissolve your LLC if you do not have an operating agreement in place. A typical agreement will display the following pieces of information:
- Owners of the LLC
- Profit distribution model
- Contingency plans dealing with potential issues, such as if a member exits or dies
State laws may also mandate provisions that must be included in the agreement to ensure a smooth managerial process. All members should have a copy of the agreement and ask any questions about the provisions they are unclear about the agreement. The following parties may request an operating agreement:
- Lenders if you are seeking business financing
- Banks when you open a business account
- Investors or business partners
- Accountants or lawyers
Although operating agreements are not mandatory, they are also useful in establishing legitimacy and credibility in the eyes of the public and potential business partners. One of the most important things to consider is a principal, which is the person (owner) who signs official documents on behalf of the LLC. The principal should reside over the bylaw process and sign agreements with other partners or institutions.
Operating Agreement Basics
The agreement must contain clauses that:
- Identify the business
- Name the participants
- Mention the location of the business
You may use straightforward clauses, and you should ensure that all parties understand the agreement and the terms included. When it comes to the purpose and terms, LLC members must decide if term limits exist for the company, or if the LLC will exist in perpetuity. For perpetual terms, added clauses should mention how the members could dissolve the LLC. For instance, members could dissolve the business through a majority vote.
Regardless, the agreement must list the nature of the business. For example, you can write that the goal of the business is to sell fruit and vegetables. In regards to responsibilities and roles of each member, the agreement should mention who is in charge and in what areas that members have dominion over. Also, you should list any employees you have hired in the agreement.
Detailing profits and distributions is important because it provides compensation models as the business grows. The agreement must also list shares and losses, and precisely how much each member has invested in the business. The clauses must also mention business cash-flow and what portion would be invested back into the business. Moreover, including parts stressing the profit distribution to members. In most cases, members get distributions that are equal to his or her share in the LLC.
The agreement must also have a clause regarding the transfer of shares if a member decides to sell his or her portion of the business. The agreement should govern how shares will be transferred between members, including the admittance of new members if the agreement permits it.
If you have more questions on sample bylaws for LLC, submit your legal inquiryto our UpCounsel marketplace. UpCounsel’s lawyers will help you draft an operating agreement that’s cohesive and protects your business interests. In addition, they will help you enforce the agreement if members or employees do not adhere to the standards of the agreement.