Structuring Success > Operating Agreement

Creating a solid operating agreement is essential for defining the structure and operations of your LLC.

Think of an Operating Agreement like a rulebook for your LLC. It lays out who's in charge, how things are run, and what jobs each member has. If any disagreements pop up, this is the go-to document. It's packed with all the important stuff you need to keep your LLC running smoothly.

Why an Operating Agreement is Important

  • Defines Roles and Responsibilities: Prevents conflicts by clearly outlining each member's roles.
  • Management Structure: Specifies whether your LLC is member-managed or manager-managed (Refer to Management Structure lesson to set up your management structure.).
  • Ownership and Profit Distribution: Defines how ownership and profits are divided.
  • Operational Procedures: Establishes procedures for decision-making and meetings.
  • Legal Protection: Demonstrates that the LLC operates as a separate entity.

Mock Operating Agreement Form

Below is a mock Operating Agreement form to help you get started. Customize it according to your LLC's specific needs.

                          OPERATING AGREEMENT OF [LLC NAME]
      
      1. BASIC INFORMATION
         - LLC Name: [LLC NAME]
         - Principal Office: [ADDRESS]
         - Purpose: [BUSINESS PURPOSE]
      
      2. MEMBERSHIP DETAILS
         - Members:
           - [MEMBER NAME] - [OWNERSHIP PERCENTAGE]
           - [MEMBER NAME] - [OWNERSHIP PERCENTAGE]
         - Contributions:
           - [MEMBER NAME] - [CONTRIBUTION AMOUNT]
           - [MEMBER NAME] - [CONTRIBUTION AMOUNT]
         - Investors:
           - [INVESTOR NAME] - [CONTRIBUTION AMOUNT]
           - [INVESTOR NAME] - [CONTRIBUTION AMOUNT]
      
      3. MANAGEMENT STRUCTURE
         - The LLC will be [MEMBER-MANAGED/MANAGER-MANAGED].
      
      4. ROLES AND RESPONSIBILITIES
         - Members:
           - [MEMBER NAME]: [RESPONSIBILITIES]
           - [MEMBER NAME]: [RESPONSIBILITIES]
         - Managers (if applicable):
           - [MANAGER NAME]: [RESPONSIBILITIES]
      
      5. VOTING RIGHTS AND DECISION-MAKING
         - Each member has voting rights proportional to their ownership percentage.
         - Decisions will be made by [MAJORITY/SUPERMAJORITY] vote.
      
      6. PROFIT AND LOSS ALLOCATION
         - Profits and losses will be allocated according to ownership percentages.
      
      7. MEETINGS AND VOTING
         - Regular meetings will be held [MONTHLY/QUARTERLY/ANNUALLY].
         - Notice of meetings will be given [NUMBER] days in advance.
      
      8. TRANSFER OF MEMBERSHIP INTERESTS
         - Membership interests can be transferred only with the approval of [ALL/MOST] members.
      
      9. REGISTERED AGENT
         - The LLCs registered agent is [REGISTERED AGENT NAME], located at [ADDRESS].
      
      10. DISSOLUTION
          - The LLC may be dissolved by a [MAJORITY/SUPERMAJORITY] vote of the members.
      
      IN WITNESS WHEREOF, the members have executed this Operating Agreement as of [DATE].
      
      [MEMBER NAME], Member
      [SIGNATURE]
      
      [MEMBER NAME], Member
      [SIGNATURE]

Components of an Operating Agreement

  • Basic Information: LLC's name, address, and purpose.
  • Membership Details: Members, their contributions, and ownership percentages.
  • Management Structure: Whether the LLC is member-managed or manager-managed.
  • Roles and Responsibilities: Duties of members and managers.
  • Voting Rights and Decision-Making: Voting process and decision-making.
  • Profit and Loss Allocation: How profits and losses are distributed.
  • Meetings and Voting: Guidelines for meetings and voting.
  • Transfer of Membership Interests: Rules for transferring ownership interests.
  • Registered Agent: Responsible for receiving legal documents (Refer to Registered Agent lesson to set up your registered agent.).
  • Dissolution: Process for dissolving the LLC.

By following these guidelines and using the mock form, you can create a comprehensive Operating Agreement that sets a strong foundation for your LLC. Continue to the next lesson to learn about the filing process for your LLC.

Feedback