How to write an operating agreement?
Considerations for Drafting Your Operating Agreement
One option is to hire a lawyer to draft your operating agreement, but there are several essential points to include. At a minimum, you should cover:
Ownership
Clarify if you are the sole owner and possess all voting rights.
Emphasize that you are not personally liable for your LLC's debts and liabilities, as this is a crucial point to highlight.
Management
Define how your LLC will be managed. If you are a small single-member LLC, you will manage it as the business owner.
Determine who will take over as manager if you become incapacitated or pass away. Note that while it is uncommon for single-member LLCs, a non-member manager can also manage the LLC.
If a manager is appointed, outline their rights, powers, and responsibilities, and describe how they will be selected.
Contributions and Distributions
Specify what property, money, or services you will contribute to your LLC, affirming its legitimacy.
Establish how profits or losses will be distributed to you. As a single-member LLC, you will receive 100% of both, reported on your personal tax return.
If you want the ability to draw from the profits at your discretion, include this in the agreement, which may be a wise strategy if you face creditor issues in the future.
New Members
Even if you start with one member (yourself), consider including provisions for admitting new members in the future. This ensures you have a clear process in place.
General Provisions
Outline the general rules for managing your LLC, including holding meetings, voting procedures, and documenting significant decisions.
Signature
Finally, remember to sign your operating agreement to make it legally binding. Our office can effectively address any legal questions about operating agreements. If you have any questions, please fill out the following form below and a Business Lawyer from our office will get back to you.
