What should you include in your LLC operating agreement?

On Behalf of | Oct 29, 2019 | Firm News

Starting a business is an exciting endeavor. You may have decided to start a limited liability company for the many benefits that this type of structure offers. Of course, you still have a long way to go before you feel as if your company is fully on stable ground to get matters moving forward. In particular, you may have reached a point at which you need to focus on your LLC operating agreement. This agreement will detail how your company will operate, along with other important details, such as the percentage of ownership for any co-owners and the share of profits and losses for each owner. Though some basic information for LLC operating agreements applies in most cases, you will want to ensure that your agreement complies with Ohio law. General agreement details In general, your LLC operating agreement can help make operational matters clear to those involved with the company. By detailing certain information, such as the previous example of the percentage of ownership, you may prevent confusion and possible conflict over that information because everyone will be on the same page. Some other details to include in your agreement are:
  • Voting rights of members
  • Rules for meetings and voting
  • The rights and responsibilities of members
  • The company’s management plan
  • Buyout rules or buy-sell terms
  • The distribution of profits and losses
  • Transition of ownership procedures

Additionally, by having an operating agreement, you and your company may be able to avoid having to comply with the state’s default regulations regarding how your LLC should operate. By having a legally-binding agreement with the members, you could determine specific rules for certain aspects of your company. Ensuring legality and enforceability Of course, just because you put something down on paper, it does not necessarily mean that it circumvents state default rules or even makes others have to legally comply with the agreement. You will need to ensure that your LLC operating agreement meets the necessary stipulations under state law and that it does not contain any information that could make it unenforceable. Understandably, you may have concerns about your operating agreement and want to make sure that it is created correctly. Fortunately, you can work with an Ohio business law attorney who can help draft your agreement. By working with a legal professional, you may better ensure the legally-binding nature of your document.