Sample LLC Operating Agreement: Everything You Need to Know
An LLC, also referred to as a Limited Liability Company, is a business structure that provides limited liability to its owners, also known as members. 3 min read
2. Operating Agreement: An Overview
3. How to Form an LLC
Sample LLC Operating Agreement
You’ll want to look at a sample LLC operating agreement if you want to create an LLC of your own. An LLC, also referred to as a Limited Liability Company, is a business structure that provides limited liability to its owners, also known as members. This means that the members cannot be held personally liable for any debts or obligations that the LLC owes. Furthermore, the LLC itself is not taxed; rather, each member pays their share of taxes on their own personal tax return.
Certain States, including Delaware, Nevada, and Wyoming, are favorable states to form an LLC in. Particularly, Delaware allows its members to remain anonymous as only the registered agent’s information is used on the formation documents. This also means that you need not be a resident of that state in order to create your LLC. Only the registered agent needs to be a resident of that state.
Operating Agreement: An Overview
An Operating Agreement is a business document that is created by the members of an LLC. It provides the rights and responsibilities of the members. The document itself is legally binding so long as all members sign it. Therefore, if you run into any potential problems, you can utilize the Operating Agreement for important decisions. Since it is legally binding, it can be introduced into court if a legal suit arises between the members. Although you might assume that the Articles of Organization governs the LLC, it does not. This is why it is so important to have an Operating Agreement, even if you are a single-member LLC.
The agreement itself identifies the members, how profits are handled, and what happens if a problem arises between members. The main elements within the Operating Agreement include: Organization, Management/Voting, Capital Contributions, Distributions, Membership changes, and Dissolution.
How to Form an LLC
It is rather straightforward to form an LLC, and regardless of whether you are creating a single-member or multi-member LLC, you can establish the LLC on your own by following these steps:
First, you’ll need to choose a business name. In order to choose a name, you will need one that is unique and available for use. Therefore, you will need to conduct a business entity search to identify whether or not your business name is available for use in the state in which you intend on forming your LLC. If you find business names that are similar or identical to yours, but have a status of INACTIVE, then you can use that business name. This simply means that your business name was used in the past, but the business is no longer active. You might also want to choose a business name that has an available URL to use.
Next, you will need to choose a registered agent. This third party, who can be either a person or company, will act on behalf of the LLC to obtain all legal notices. If you want to form a single-member LLC, some states allow you to act as the registered agent, so long as you are a resident of that state. The registered agent should be identified on both your Operating Agreement and Articles of Organization.
Next, you will need to file the Articles of Organization. Keep in mind that every state has its own requirement for this documentation. You can either choose to file this document online, or mail it to the Secretary of State’s Office. The fee for filing is usually between $80 and $150. It must include the following information:
• Principal place of business
• Mailing address (this can be the same as the principal place of business)
• Name/address of registered agent
• Correspondence name/e-mail address
• Name/address of all members
While an Operating Agreement is not required, it is helpful. Even if you do draft this agreement, you need not submit it to the Secretary of State’s Office. However, once you do finish drafting the Operating Agreement, you should provide all members with a copy.
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