Dan's Desk

Operating Agreements for LLCs

Written by Dan Gallatin | Aug 5, 2022 3:51:40 PM
The Operating Agreement - the handbook for the company, the manual for navigation, the least used document in possibly all of corporate history.
 
If you have a single member LLC, the Operating Agreement is very useful pretty much just for the purpose of identifying leadership if you pass away while owning the LLC.  It is basically a supplement to your estate plan.
 
For multi-member LLCs, this is a critical document.  You need to plan for a break-up.  Planning while you are getting along with your owners is much easier than planning a break-up while you're breaking up.
 
The Operating Agreement identifies buy-out procedures, valuation processes, leadership roles and responsibilities, and the other core elements of the LLC.  In your best case scenario is just gets looked at a couple times per year for a refresher.  In a worst case scenario it lays out the required methods for eliminating an owner or kicking a member for failing to abide by the terms.
 
Check your shelves or hard drive.  If you don't have this document, I urge you to get it in place soon!