No matter the size or industry, running a business is incredibly difficult, and depending on how your company is formed, there are legal ramifications you must consider. This is why lawyers recommend that companies draft operating agreements for protection. In New York, it is recommended that every LLC draft and execute an Operating Agreement to establish the rules of operation as the members dictate.
Why make this agreement?
By crafting this Agreement, the members of an LLC will get the benefits of:
- Great flexibility for regulating rights and responsibility according to the LLC
- Proper management of the LLC
The agreement typically are drafted to include rules that not only apply to the members of the LLC but also to the management of it [if you have a manger managed LLC]. Here are just a few questions to keep in mind while crafting LLC Operating Agreement :
- Who are the owners of the LLC ?
- Will your LLC be member or manager managed?
- What each member is responsible for contributing to the LLC?
- How profits and losses will be distributed between the members?
- When will the LLC distribute profits?
- The method of managing every day affairs of the business
- What members are given the power to vote
- List of other obligations to which the members are bound
- What will happen if a member wants to leave the LLC
This is just a very limited list of the many points that are typically covered in an LLC Operating Agreement. An experienced business lawyer will be able to help you sort through this list and make sure all members, and the business itself, are properly protected.