If you’ve looked into incorporating your business as a limited liability company (LLC), then you’ve likely heard the terminology “operating agreement” (OA). It’s serves a similar role to a corporation’s bylaws. It’s the document used to enumerate the different LLC owners’ business arrangements with one another as well as the procedures that they intend to follow in operating their business.
Although there’s no one standard to how what an OA should include or how it should be written, there is certain standard information that should be included in them.
The name of the LLC and any doing business as (DBA) name, its principal location as well as the date it was formed should also be clearly described in it. It should also list the names and the addresses of any of the LLC’s members as well as its Registered Agent.
Any contribution of assets that was made to the company by its members should be described the LLC’s operating agreement. The same logic applies for any debts that the company may have that its members aren’t liable for.
The reasons that the LLC was formed should be described there. A description of its management structure including whether there will be a single manager or several of them and whether any are also the company’s owners should be detailed in it.
Details surrounding the selection and onboarding of new managers, LLC members should each have their own section in the OA.
Contingencies that exist if one of the LLC’s members doesn’t uphold their agreed-to responsibilities or decides to leave the company, divorces or passes away.should be described in the OA. Procedures for amending it should also be included.
Fiduciary responsibilities of the LLC’s officers, managers and members should be highlighted in the OA. These include their responsibilities to act in good faith when entering into contracts and to excercise a reasonable duty of care to the company and its interests.
The OA should detail when meetings will be held to discuss both short-term and long-term goals for the company as well as how records of those will be stored.
Words and abbreviations that are used repetitively throughout the OA should be both defined and capitalized in all instances in which they appear in this document.
If you’re considering setting up an LLC, then a Cincinnati attorney can guide you in the process of doing so.
Source: The Balance Small Business, “What is an operating agreement for an LLC?,” Jean Murray, accessed June 07, 2018