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What Makes a Good Operating Agreement

An operating agreement is a governing document between the members of an LLC (Limited Liability Company). This agreement outlines the governing structure of an LLC, the members’ roles, managerial duties, and financial rights.

A well-written Operating Agreement should contain the following:

  • Identification of key members of the LLC
  • An outline of each member’s roles and responsibilities within the LLC
  • Determine each member’s percentage of ownership of the Company
  • Outline of the business’s purpose
  • An agreement covering contributions invested by each member of the LLC
  • A clear statement of what the company will do with profits, losses, and distributions
  • Determine if/who will receive compensation from the business
  • Determine each member’s voting power within the Company
  • Rules for selling shares/ownership of the Company
  • What to do in the case of member death or disability
  • Rules for partner dissolution

Having a good operating agreement will be important to help your business function well, particularly when issues arise that everyone can’t agree on.

If you would like help writing your Operating Agreement to properly address the above, please don’t hesitate to call us at Layman & Nichols, P.C.

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