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A written operating agreement is a legal contract that is drawn up during business formation of a limited liability company (LLC). This agreement defines certain rules, processes, and provisions that govern the way that businesses are operated internally.
Operating agreements are important because they help differentiate limited liability companies from sole proprietorships, which protects a business owner’s personal assets from their business ones.
Written operating agreements are required to form a limited liability company in all fifty states.
If you want to establish your business as a limited liability company, you’re going to need a written operating agreement. This might sound like a daunting process, but it’s actually not a complicated as you might think. With the help of business lawyers, you can craft an operating agreement for your multi-member LLC or single-member LLC in five easy steps.
The first section of your written operating agreement should contain vital information about the members of your LLC:
Once you establish the basic details, it’s time to move on to more specific information regarding the members – ownership percentages. When you start an LLC, multiple people usually come together and pool their resources to get the business up and running. This might include money, knowledge, or time. In exchange for this, each member receives a percentage of ownership in the company, which can be determined however the group would like.
Decide how much ownership each founder should have in the LLC and document it in your written operating agreement.
Protection is one of the most important aspects of an operating agreement. The next section of your legal document should include information about the rights and responsibilities of each member of the LLC. These might include:
Successful operating agreements set the groundwork for successful business dealings in the future. That means that when you write an operating agreement, you must come prepared for certain events that could occur, such as having new members join your company or existing members leaving.
It’s essential that you have an action plan for when one of these events occur. Make sure to be as detailed as possible and to define what happens to any ownership percentage that a departing member owns and what a joining member will gain after becoming a member.
Creating dissolution terms for when an LLC closes is another important part of an operating agreement. This section should include specific instructions, duties, and responsibilities of each member in the event of a dissolution. Make sure to include vital details, such as:
A severability clause serves to protect certain terms of the agreement in case any part of it is deemed in conflict with state or federal law. It states that should any part of the agreement be in conflict, the rest of the agreement will still sand. This clause is extremely important, so be certain that you don’t leave it out.
Check out this article to learn more about how to write a solid written operating agreement.
Meet some lawyers on our platformSuccessful operating agreements are all-inclusive of the operations of a limited liability company. If you leave out any important details, all members’ liability is at risk, so it is essential that you mind the details and make sure everything that should be included, is.
The best way to ensure that your operating agreement is legally sound is to consult the help of business lawyers. These professionals will help you make sure you include all the most important details, such as
Here is an article about the most important aspects of operating agreements.
Operating agreements are essential to keeping limited liability companies in alignment with state and federal law. Whether you have a single-member LLC, a multi-member LLC, or a partnership, you need an operating agreement. The guidelines for each are similar, but there are a few key differences.
Single member LLC operating agreements are optional, but you shouldn’t let that stop you from creating and filing one. Having an operating agreement on file for your limited liability company still protects your personal finances from your business ones, so it is not something you want to opt out of. The only difference between this type of operating agreement and a multi-member LLC operating agreement are:
Multi-member LLC operating agreements are vital and mandatory by all fifty states in the U.S. This is because operating agreements determine important rules, regulations, and workflows for businesses that are needed in the event of any legal battles. In many cases, a multi-member operating agreement overrides state default rules, which gives business owners and LLC members more freedom to do what they want. They also help to protect all members’ personal finances.
Partnerships have legal documents that are similar to operating agreements called partnership agreements. Even though states don’t require partnership agreements, they are still recommended to protect the interests of the members of any partnership. Since disagreements between partners are bound to happen with any partnership, they are also helpful to settle arguments and make sure there is legal recourse if any legal disputes arise.
Learn more about the types of operating agreements by checking out this article.
Operating agreements contain vital information about business dealings and are crucial for legal disputes down the road. Consequently, it is always wise to consult business lawyers for assistance with crafting them, but that does not mean you can’t write an operating agreement. As long as you ensure you contain all the necessary details and make sure you are as thorough as possible, you should be able to craft an operating agreement that will stand up in court.
Check out this webpage to see an example of an operating agreement.
If you want to create an operating agreement for your limited liability company, but you’re not sure where to start, help is available. Professional business lawyers know all the ins and outs of operating agreements and can make sure yours is legally sound. Post a project on ContractsCounsel today to get in touch with business lawyers well-versed in creating written operating agreements for all types of limited liability companies.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Cassandra Way CC customerI am a California-barred attorney specializing in business contracting needs. My areas of expertise include contract law, corporate formation, employment law, including independent contractor compliance, regulatory compliance and licensing, and general corporate law. I truly enjoy getting to know my clients, whether they are big businesses, small start-ups looking to launch, or individuals needing legal guidance. Some of my recent projects include: -drafting business purchase and sale agreements -drafting independent contractor agreements -creating influencer agreements -creating compliance policies and procedures for businesses in highly regulated industries -drafting service contracts -advising on CA legality of hiring gig workers including effects of Prop 22 and AB5 -forming LLCs -drafting terms of service and privacy policies -reviewing employment contracts I received my JD from UCLA School of Law and have been practicing for over five years in this area. I’m an avid reader and writer and believe those skills have served me well in my practice. I also complete continuing education courses regularly to ensure I am up-to-date on best practices for my clients. I pride myself on providing useful and accurate legal advice without complex and confusing jargon. I look forward to learning about your specific needs and helping you to accomplish your goals. Please reach out to learn more about my process and see if we are a good fit!
Attorney Kegler has been licensed to practice law in the State of North Carolina since 1998. Over the years, she has worked in firms that focused on small business financing, initial startup formation, to starting several businesses of her own with bootstrap financing to venture capital funding. As a Certified Dream Manager, she couples the skills of listening to understand the big picture to get to solutions that not only fit today's needs but also the long term needs of her entrepreneurial clients.
I'm a Washington-licensed lawyer specializing in trademark practice and with an extensive trademark education and academic background. I currently work with domestic and international businesses seeking trademark protection in the U.S. by conducting trademark searches, providing legal advice, submitting USPTO applications, and preparing responses to office actions. I'm passionate about trademark law and always looking forward to helping small and medium businesses promote their value by having a registered federal trademark. If you have questions or concerns about trademark/copyright/IP licensing and require legal advice, feel free to contact me and we can have a first chat.
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**Bio:** My name is Jorge Ramos, and I am an experienced family law attorney practicing since 2011. Over the years, I have honed my skills and knowledge in family law, having worked with prestigious law firms before establishing my own solo practice. My expertise spans a wide range of family law matters, including divorce, child custody, spousal support, and property division. I am dedicated to providing personalized and compassionate legal representation, ensuring that my clients receive the support and guidance they need during challenging times. My commitment to excellence and client-focused approach have earned me a reputation as a trusted advocate in the field of family law.
I worked in the Intellectual Property Group at Fidelity Investments for almost 25 years, including managing the group from 2017-2021. I managed and developed the same high-performing group of three legal professionals from 2007-2021. Early in my career at Fidelity, I focused primarily on trademark matters, including trademark searching and clearance, as well as enforcement of trademark rights. In fact, I created Fidelity's trademark and brand protection programs and advanced them over more than two decades, eventually bringing the domestic trademark portfolio in-house and realizing savings of well over $2 million in outside counsel expenses for searching, prosecution and maintenance of US registrations from 2008-2021. Fidelity put me through law school, and I continued working full time while attending law school at night over four years. Upon graduation and passing the bar in 2006, I was promoted to an attorney position effective 1/1/2007. My practice broadened, and I began working on more transactional matters. I became a key transactional attorney for major technology groups and businesses within Fidelity, and negotiated numerous mission critical tech deals, transforming Fidelity's business. I provided transactional and IP support for Fidelity's software development and services affiliate in Ireland, and worked extensively with many of Fidelity's other foreign affiliates. Fidelity's General Counsel handpicked me to provide transactional and IP support to a new business initiative in 2017. That initiative became fintech startup Akoya, LLC, a paradigm-shifting business that enables secure, customer-controlled sharing of personal financial information between financial institutions and service providers. I developed template agreements between Akoya and data providers (financial institutions) and also between Akoya and data recipients (e.g. tax preparation services and financial advisors). Akoya had matured enough to be spun out by Fidelity in early 2020 to a consortium of financial services companies. In 2021, Fidelity offered a voluntary buyout to long-tenured associates, and following the pandemic, coupled with the financial and health benefits included in the package, it was an offer I could not refuse. Days later, my elderly father-in-law broke his hip, and my wife and I became his primary caregivers. It's been a blessing that I was able to contribute to his care and alleviate some of the burden on my wife. He is now in a long-term care facility, and I am eager to return to work as in-house counsel, whether on a contract basis, part time or full time. I did work briefly as a sole practitioner in 2021 and 2022, primarily helping friends, family and pro bono clients with NDAs, business formation issues, consulting agreements and license agreements. From August 2022 - July 2023, I was on the staff of Flex by Fenwick, an in-house counsel on demand business that is a subsidiary of the IP firm Fenwick & West, but did not get any engagements. My wife and I have volunteered for over a year with a dog rescue, Last Hope K9 Rescue, and have fostered several dogs, and adopted two of them!