What is an operating agreement?
An operating agreement is a contract between LLC members. It details financial rights and obligations, duties, the rights of managers etc. Most states require one, but Wyoming does not. So should you still have one?
The answer depends. Single member LLCs sometimes need one, but in such instances be careful about what it says. For multi-member or professionally managed LLCs the answer is yes.
We provide an operating agreement if we form your LLC. It is completed with your information and ready to print and sign.
Single Member LLC Operating Agreement
An operating agreement is sometimes considered superfluous as it’s an agreement with yourself. You may amend or disregard it at anytime. We supply one for two important reasons:
Transfer on Death Provision
Banks Frequently Request Them
Multi-Member LLC Operating Agreement
There is no reason not to have one. We suggest members sign and upload the agreement to the portal for secure storage. The agreement accomplishes several things:
Sets Ownership Percentages & Contributions
Defines What Mangers Can & Cannot Do
Restrict Membership Interest Transfers
Story 1: Imagine two people purchase a home. One takes the loan and the second is not on the documents. The property either loses value, is sued or experiences rising payments. Cash flow turns negative and the second party quits contributing funds. However, the first party is still liable for the entire loan, not just their share.
Agreeing in writing to contributions mean the first party could sue for breach of contract and hold the second party liable. Not agreeing means the first party has no recourse.
Story 2: After five years you receive a buy out offer. However, there are multiple partners and transfers in and out were not documented. Members cannot agree what was salary, versus a loan, contribution or distribution. Who owns what now? How will you convince a judge?
Operating agreements are an integral part of Limited Liability Companies. They ensure agreement between members, and a smooth transition after your death. In our experience, if members do not sign an agreement in the first thirty days, then it is never signed. This can create major headaches, including the blurring of membership interests. You may contact us about a custom operating agreement.
What corporate services do we offer?
We offer services designed to make starting and running your company simple. Allow us to form your company, run your virtual office, forward your mail and act as your registered agent. You focus on what matters - running your company.