Do I Need An Operating Agreement for My LLC?
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An operating agreement, one of an LLC’s (limited liability company) most important legal documents, should be one of the first documents you create when you form your LLC.So, does an operating agreement need to be notarized? Drumroll please . . . the answer is: no! Just because it’s a legal document doesn’t mean that it needs to be officially witnessed or notarized, which makes your life as a business owner a little bit easier.
However, should you want to have it notarized to make it feel more “official” for everyone involved, you can do so for a standard notary fee but rest assured, the answer to “does an LLC agreement need to be notarized” is no.Now, let’s look at how an operating agreement works.
What is an operating agreement?
An operating agreement is a fundamental document of an LLC as it lays out the finances and roles of the members in the LLC. In fact, LLCs in some states are required by law. Even in states that don’t have such laws, they’re highly recommended.
The content can vary depending on the state in which you live, but most operating agreements include the following sections:
- Organization - When was the company created and what’s the ownership structure?
- Management and Voting - Is it managed by members or a manager? How are the votes allocated among members?
- Capital Contributions - Have members made monetary contributions to start the LLC?
- Distributions - How are the profits and losses going to be shared among members? How will money, other property, and business assets going to be dealt with?
- Membership Changes - How can members be added or removed? What happens if a member dies or goes bankrupt?
- Dissolution - What happens if the company has to be dissolved? Unlike the articles of organization, the operating agreement doesn’t need to be filed with the state. In fact, they should be kept confidential.
What are the benefits of having an operating agreement?
Even if an operating agreement isn’t required where you live, it’s a good idea to have one because they clearly lay out what will happen in a variety of business situations, help prevent confusion and potential arguments, and clearly articulate people’s roles.
They also give your company standing and make it more likely that a court would actually find that your company has limited liability. Without a formal agreement, your LLC members may be more open to a finding of personal liability by a court.
Think of an operating agreement as a protection plan to hedge against future disagreements or issues between members.
How to create a good operating agreement
The operating agreement is what dictates how your LLC is structured and operates, and it lays out the relationship among the members, so it’s hugely important that careful thought and consideration is put into its contents.Remember, every member of the LLC and the manager(s) need to sign the operating agreement on separate signature pages. Of course, there are so many other rules, components, and best practices that go into creating quality operating agreements. That’s why it’s always a good idea to have a lawyer draft it for you.
That’s where LegalShield comes in. With a plan starting at less than $2 a day, you can get legal advice and help from an experienced small business lawyer in your area for issues connected to drafting your operating agreement.
The importance of having a good operating agreement
You want a good quality operating agreement for several reasons:
- Protects your limited liability status in court
- It’s documentation that shows the various agreements you’ve made with your business members to protect against future disputes
- If you don’t have one, you could be forced to follow your state’s laws regarding operating agreements, which may be detrimental to your interests
LegalShield can help
By purchasing a LegalShield legal plan and Home Business Supplement, you’ll have access to a LegalShield provider business lawyer, who will help you with the issues related to operating agreements. Once you’ve signed up for a plan, which starts for less than $2 a day, a provider lawyer will get in touch with you within hours of you reaching out.
Your lawyer will talk to you about the process in your state. LegalShield is here to assist you with the legal help that you need, so reach out today. We’d love to hear from you.