When it comes to starting a limited liability company (LLC), one of the most important things you should have is an operating agreement. An operating agreement is a legal document that outlines how your LLC will be managed, and it`s essential to have one in place to protect your business and personal assets.
If you`re starting an LLC with multiple members, it`s important to have a member-managed operating agreement. This type of operating agreement outlines the roles, responsibilities, and rights of each member of the LLC, as well as how decisions will be made and how profits and losses will be allocated among members.
A member-managed operating agreement is different from a manager-managed operating agreement, which is used when the LLC is managed by one or more designated managers, rather than the members themselves.
The member-managed operating agreement typically includes the following provisions:
1. Member Roles and Responsibilities: This section outlines the duties and responsibilities of each member of the LLC, as well as their rights and powers within the company. It also outlines how new members can join the LLC and how they can leave.
2. Decision Making: This section outlines how decisions will be made within the LLC, including how meetings will be conducted, how votes will be cast, and how disputes will be settled.
3. Profit and Loss Allocation: This section outlines how profits and losses will be allocated among the members of the LLC. This is a critical provision, as it will determine how much money each member will receive and how much they`ll be responsible for if the company incurs losses.
4. Management: This section outlines the management structure of the LLC, including how the members will manage the day-to-day operations of the company. This includes decisions like hiring employees, signing contracts, and making financial decisions on behalf of the LLC.
Overall, having a member-managed operating agreement in place is essential for any LLC with multiple members. It helps to ensure that everyone is on the same page regarding their roles and responsibilities, decision making, and profit and loss allocation. By having this legal document in place, you can protect your business and personal assets and avoid future legal conflicts with your fellow LLC members.