As the owner of a limited liability company (LLC), you need to have an operating agreement in place to formalize the structure and operations of your company. An operating agreement helps to outline the rules and regulations that govern the LLC, which is essential for its smooth running. In this article, we’ll provide a checklist for drafting LLC operating agreements.
1. Introduction
The introduction of the operating agreement should include the name of the LLC and its purpose. It should also specify the date of the agreement and the details of the members.
2. Business Structure
The operating agreement should specify the type of business structure—an LLC with one or multiple members. If you’re running a single-member LLC, the operating agreement may not require as much detail as it does for a multi-member LLC.
3. Contributions
Define the contributions of each member, which may include cash, property, or services. Also, specify how the profits and losses will be shared among the members.
4. Management
Specify the management structure of the LLC. You may choose to elect a manager or have the members manage the company themselves. The operating agreement should also outline the responsibilities of the manager or members.
5. Voting Rights
The operating agreement should outline the voting rights of each member. Specify the percentage of votes required to make significant decisions and how voting power may change over time.
6. Meetings
The operating agreement should outline how meetings will be conducted, the frequency of meetings, and how they’ll be documented.
7. Dissolution
In the event that the LLC needs to be dissolved, the operating agreement should outline the process for doing so and how the assets will be distributed among members.
8. Transfer of Membership
Specify the process for transferring membership of the LLC, including any restrictions on who can become a member and how it will be done.
9. Amendments
The operating agreement should include a provision that outlines how amendments to the agreement can be made and the process for doing so.
10. Conclusion
The conclusion of the operating agreement should include signatures from all members to indicate that they agree to the terms laid out in the document.
In conclusion, an LLC operating agreement is an essential document that outlines the rules and regulations for the smooth running of your company. By following this checklist, you can draft an operating agreement that meets the needs of your LLC and ensures that all members are on the same page.