If you’re thinking about starting an LLC, you might be wondering what an operating agreement is and why you need one. In short, an operating agreement is a contract between you and your LLC that defines how you will interact with your company. This includes things like who is responsible for what functions in the LLC, who is able to open bank accounts and sign contracts, and what happens in the event the company is sued. Having an operating agreement in place can help limit your liability as a business owner and provide some much-needed direction if your company hits a rough patch.
What is an LLC Operating Agreement?
An LLC operating agreement is essentially a contract between you and your LLC that defines how you interact with your company. This agreement outlines things like who is responsible for what functions in the LLC, who is able to open bank account, financial accounts, get loans, sign documents, sign contracts, etc. Essentially, it limits liability for the activities of the company and provides direction in the event the company or one of the members is sued.
Sound complicated? Don’t worry – we’re here to help walk you through everything you need to know about an why you need one and how to create it. Read on for more information!
Why You Most Definitely Need One?
While not all states require LLCs to have one in place, it’s generally a good idea to have it anyway. That’s because an operating agreement can help do two things: limit your liability as a business owner and provide some much-needed direction if your company hits a rough patch.
Having an one can help limit your liability because it establishes you as a separate entity from your LLC. This means that if your LLC is sued, your personal assets (like your house or savings account) are protected. And in the event that one of the members of your LLC sues the company, the operating agreement can help resolve any disputes that may arise.
It can also provide much-needed direction for your LLC if it hits a rough patch. For example, let’s say one of the members of your LLC gets sued by a third party. It should have provisions in place for what happens in this situation, including how any associated costs will be paid and whether the member will be required to step down from their position within the company.
How Do I Create an Operating Agreement?
Creating an LLC operating agreement doesn’t have to be complicated or expensive. There are a number of templates available online that you can use as a starting point – simply search for “LLC operating agreement template” and you should be able to find a good option easily enough. Once you’ve found a template you like, simply fill in the blanks with information specific to your business. If you get stuck or have any questions along the way, don’t hesitate to reach out to a qualified attorney for help – they’ll be able to point you in the right direction and ensure that yours is watertight. With BusinessAnywhere we include an operating agreement with every LLC business registration as part of your package.
Conclusion:
An operating agreement is a crucial document for any LLC, even if it’s not required by state law. That’s because it can help limit your liability as a business owner and provide some much-needed direction if your company hits a rough patch. If you’re thinking about starting an LLC, be sure to draft up an operating agreement that covers all of your bases. Trust us, you’ll be glad you did if anything ever goes wrong!
