Operating Agreements
Small Business Solutions
What is an Operating Agreement, and do I need one?
If you are looking to start a business or already have one, it is crucial to have a strong and detailed operating agreement.
An Operating Agreement is a governing document for a Limited Liability Company (LLC). This agreement is extremely important, it helps to dissect the inner workings of your business. All LLC’s must have this documentation especially if the business has more than one owner.
The Operating Agreement should answer questions such as:
- How much money is going to be contributed by the owners?
- How and when the cash distributions will take place to the owners?
- Who will be the manager and what will their authority level look like?
- What votes or issues need to be decided on by the owners/members?
- What will be the provisions regarding a sale of an ownership?
- How will disputes be resolved?
Next you may be asking, “How do I write this agreement?”
The answer is our world today provides many resources to be able to write the perfect and most detailed operating agreement. However, it is highly recommended that you consult with an attorney.
This does not mean you just hand it off and let them figure it out – it is essential to be a part of the process. Be sure to fully understand the document before it is passed on and signed by all parties involved. If cautionary steps are not taken in the beginning, it may cause nothing but problems down the road.