When you decide that it is time to take your small company and incorporate it, you will find that there are many different forms that must be filled out. One of the most important documents you are going to need is an LLC operating agreement. A template can be used to create this particular document to make sure that when you take it to the courthouse there are no problems and your new company can get off to a great start.
Your LLC Operating Agreement is a document kept internally, signed by all members and kept on file with the limited liability company itself. It is not filed with a specific government entity, nor does it have a deadline or due date-- but that doesn't mean it isn't one of the most important documents your LLC has at its disposal.
Sometimes called a Member Control Agreement or an Operating and Member Control Agreement, this document is an important source of guidance and direction for your business, and you can not afford to overlook this part of your business paperwork.
The reason many companies decide to establish themselves as a limited liability corporation is for the many tax and legal benefits that this type of corporation offers compared to any other format. You will use this agreement form to set out the way in which your corporation will be established as far as a board of directors, upper management and the overall structure of the corporation. Since most LLCs are formed by a group of investors who have all invested a different percentage of the whole, this document will disclose who owns what percentage of the business based on the amount of money they put up to get the company started.
Today instead of using percentages in the LLC operating agreement, most companies now assign PARTNERSHIP AGREEMENT that are similar in nature to shares that can then be sold or reassigned. When percentages were listed this task was all but impossible to do and trying to bring a new member on board was considered to be a nightmare of logistics as everyone's percentages of ownership had to be recalculated. All of this information must be written down in the agreement before it is signed and becomes a legally binding document.
An operating agreement typically includes the following:
Responsibilities and duties of the members and managers
Whether management is vested in members, or managing members
Rights afforded to those members
Specific distribution of profit or loss among the members
When and how much members contribute financially to the business
How a member will be replaced upon leaving or death
How a member can be removed
Percentage of members required in order to legally have a membership meeting
The amount of money the corporate officers can spend without member approval
Method by which members can transfer their ownership interest (like corporate shares) to another entity
Responsibilities and duties of the members and managers
Whether management is vested in members, or managing members
Rights afforded to those members
Specific distribution of profit or loss among the members
When and how much members contribute financially to the business
How a member will be replaced upon leaving or death
How a member can be removed
Percentage of members required in order to legally have a membership meeting
The amount of money the corporate officers can spend without member approval
Method by which members can transfer their ownership interest (like corporate shares) to another entity
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