The most common mistake we see with clients who have a Limited Liability Company (LLC) is that they don’t have an Operating Agreement. Maybe you are one of those business owners that believe all you need to protect your business is the LLC you set up. Unfortunately, that is only the beginning of the story and not where you want to be. In fact, whether your LLC is owned by ONE person or maybe you have several business partners, you still need an Operating Agreement.
How does an Operating Agreement help your LLC?
I know, I’m on fire lately with the live streaming but here’s another really important video you can find on YouTube and Facebook. My goal is to help you be able to say, “Yes, I deserve liability protection!” What is an Operating Agreement? The Operating Agreement is a contract between the members of the LLC and the LLC. It’s a way to show a court that you deserve liability protection because you’ve separated yourself individually from the company. The Operating Agreement can be pulled out and submitted as evidence to prove that you are maintaining the LLC appropriately.
Here’s a Press Release where you can read more: Will Your LLC Legally Protect Your Personal Assets?
Here are the 5 reasons the LLC needs an Operating Agreement:
Disputes are easy to resolve because you’ve decided ahead of time how to resolve issues instead of waiting to do it when emotions are high.
It makes it easy to hold a bad actor accountable. Members are human and will not behave appropriately all the time. The Operating Agreement provides a way to address problems.
Transfers of interest can be handled smoothly and legally if a member dies or wants out of the business.
It keeps decision making under control by making sure all business partners are on the same page with voting and who has what power; how profits are split, etc.
Lastly, the Operating Agreement is part of the documentation needed to show you are maintaining the LLC for liability protection. Without documentation then you create exposure to risk with an audit or a lawsuit.
Hiring a business attorney is smart and probably won’t cost as much as you think. If you are one of those business owners who have an LLC but not the Operating Agreement or Consent Forms, no worries, we’ve got you covered with an “LLC Maintenance Package.” It’s never too late to protect your business. Call us for more information!