| This Article explains the two main purposes of an LLC | | | | your LLC have to each other and to the LLC. |
| Operating Agreement and why it is important foe | | | | You and your LLC's other members should not rely on |
| every LLC to have an LLC Operating Agreement. | | | | oral agreements as to who owns how much in the |
| LLC business owners understand the importance of | | | | LLC and who has what percentage of votes. You do |
| forming an LLC in order to receive limited liability | | | | not want to find yourself in a situation where your LLC |
| protection and get the tax and other benefits of an | | | | is making a lot of money and one of your members |
| LLC. However, many of these owners form their LLC | | | | then claims he/she owns more of your business! |
| and then forget about the LLC Operating Agreement. | | | | Purpose #2: The LLC Operating Agreement |
| Formation under state law is only the first step in | | | | Establishes a Management Structure of the LLCOne |
| completing the LLC organization. Do not forget to put | | | | of the benefits of an LLC is that the LLC laws allow |
| an LLC Operating Agreement in place for your LLC. | | | | Members to decide amongst themselves how they |
| Purpose #1: The LLC Operating Agreement | | | | want to run and operate their LLC business. |
| Establishes Ownership of the LLCDid you know that | | | | The LLC Operating Agreement establishes the |
| when a limited liability company (commonly known as | | | | management structure for an LLC. The Members can |
| an LLC) is formed under a state's law, the LLC does | | | | decide for themselves whether the Members will have |
| not have any members (owners) unless the members | | | | authority to make LLC decisions or whether the LLC |
| are specifically listed in the Articles of | | | | will appoint managers to make business decisions. |
| Organization?Because most state LLC laws do not | | | | Now, the LLC laws of each state do provide "default" |
| require that the members of the LLC be stated in the | | | | provisions for management of an LLC in the event |
| Articles of Organization, 98% of new LLCs do not | | | | you do not have an LLC Operating Agreement. But, |
| have members right after formation. | | | | you do not want to rely on what your state law says |
| The most common way to issue ownership interests | | | | about who controls your LLC. Many of these default |
| in an LLC is through the LLC Operating Agreement. | | | | laws end up being drastically unfair to the Members of |
| So, the most important purpose of an LLC Operating | | | | the LLC and definitely not what was intended by the |
| Agreement is to establish the owners of the LLC and | | | | Members. |
| determine what rights and obligation the Members of | | | | |