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Drafting your LLC operating agreement

Once you’ve decided to form your limited liability corporation (LLC), there are many things you need to do as part of the startup process. One of your main tasks is drafting an operating agreement.

What is an operating agreement?

An LLC operating agreement is a written document that states the specific rules of your LLC. You can include anything you want in your operating agreement, but most agreements contain terms on financial structure, management responsibilities, meeting rules and specific duties of different members.

You should also consider potential future events or occurrences when drafting your operating agreement. If you decide to sell your LLC, your operating agreement can contain terms regarding succession planning.

Why should I have an operating agreement?

There are many advantages to having an operating agreement, even if you are the only member of your business.

Since an LLC is designed to shield business owners from certain debts or liabilities, your operating agreement can include language distinguishing which debts and liabilities the LLC is responsible for, versus you personally. This means that creditors cannot go after your personal assets to collect on LLC debts.

After your LLC is up and running, your operating agreement can provide clarity and prevent confusion when issues arise. Referring to your operating agreement can help you decide on the best path to take.

An operating agreement is also beneficial if you decide to take on a partner or additional members. It can help others have a clear sense of how your business runs and decrease the chance of a conflict.

Can I change my operating agreement?

Business needs and goals change throughout the life of the business. Your operating agreement can be changed or amended as you see fit.

An experienced business attorney can help you draft your operating agreement. Once complete, you should keep copies of it in a safe place.