What is an LLC operating agreement and do I need one?

An operating agreement is an agreement between the owners of a LLC (limited liability company) that sets forth the structure, management, decision-making process, and operating procedures for the business. Put another way, an operating agreement is a “How-to Guide” for how the LLC should be operated and managed.

Some common provisions include member duties and obligations, voting rights, tax considerations, and transfer provisions. When designing your LLC operating agreement, it is important to make sure its provisions are specifically structured and tailored to your business operations. 

While an LLC is not required to have an operating agreement to conduct business, an operating agreement can be incredibly valuable to your business. The operating agreement provides protection for business owners from business liabilities.

Without a formal operating agreement, you may become a target for a lawsuit against the LLC and you personally - which puts your personal assets at risk. Along with protecting business owners from business liabilities, the operating agreement also provides clarity and flexibility in how the LLC is structured and run.

If you have questions on how to structure your LLC operating agreement, give one of our business attorneys a call today at (605) 275-5665.