Victoria Z.
We help companies to be the best they can be, including expertise with Native American Casinos and Tribal Councils
Do you have a good operating agreement for your LLC? What did you include in it? Did you have a template to work from?
we formed our LLC with an online legal service. But I have a feeling that the operating agreement they put together is very generic and should include more specifics. I'm looking for some good suggestions on specifics for this kind of document.
Answers (8)
Be very careful about generic Operating Agreements. A good OA is a risk assessment and management vehicle allowing you and your partners to anticipate future stumbling blocks and address them now. It should be a road map that all of you can consult for guidance on how to resolve disputes. Spending a little money up front on a good lawyer to help you assess and manage risk conveys a benefit that far outweighs the savings gleaned from an impersonal template.
Contact me if you'd like to discuss this further.
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Mark R.
Attorney and Partner at Robertson & Williams
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There a re so many variables that could go into an operating agreement it is difficult to answer your question without more information on what you are trying to accomplish. The short answer is obviously to find a good business lawyer in the jurisdiction you organized the company in and get his or her professional advice.
An operating agreement is a governance document, a buy-sell agreement and much more. One member or more? Buy-sell, right of first refusal, drag along tag along? Death, divorce, employment termination buyout? Member governed or manager governed? Officers? Different voting or other preferences? Just a short list of items to consider in preparing an operating agreement. Again - seek professional advice.
Kenneth L.
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An operating agreement is a separate document, not controlled or required by the state or the federal government but very important to your company.
It should be a simple, straightforward document you and your prospective partner(s) can draft yourselves, addressing such matters as % of ownership, how revenue will be distributed and other general matters, as well as who can commit the company in the form of credit cards, who signs checks on the company account and other administrative matters.
Buying out a partner should also be covered as well as adding new members if the need arises down the road.
I have seen many enterprises fail or go through terrifically hard times due to lack of an operating agreement. The parties should sign it after a review by a lawyer. It should then be notarized and made an official part of the company file.
You can download a free generic operating agreement with instructions from the 2nd Vertical "Box Net" cube in the left margin of the below site. You can feel free to borrow from the sample or supplement it as you see fit. It is fairly comprehensive in order to cover most business situations and there may be elements of the example you feel are not necessary.
Links:
Great responses so far - I would add that any special allocation of tax gains and losses, capital account treatment, and other similar issues should also be addressed in your agreement. If you wouldn't use a boilerplate business plan for the business, then I wouldn't recommend a boilerplate operating agreement - a few dollars now will definitely save you major headaches down the road.
Dana S.
High-touch Legal Services® for Startup and Early-stage Companies
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Victoria -
You are right to be concerned. For a single-member LLC, the OA is not such a big deal, but for a multi-member LLC it is critical. This point is discussed in "Can I form an LLC without a lawyer?" at the link below.
An experienced business lawyer can help you put together a proper OA. However, if you are unable or unwilling to pay the required legal fees, the next best approach is to buy the appropriate book (with form documents) from Nolo.com - you'll have to put in some time, but you'll learn important information.
Dana
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
Links:
incorporation, MSA, license agreements, NDA and other legal templates for your start up company - www.mystartuplegaltemplates.com
Alok J.
Product Manager/UX Manager @ Insight Methods
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Victoria,
Some of the key things I would look for are:
- How are the decisions of ownership being made (e.g. can a member sell/transfer her rights without super majority vote etc)
- How would revenue share be done
- Payout - how would any payout happen and what is the timeframe ( for instance if one of the members dies- extreme but this is a long term agreement)
- Legal responsibility - clearly specify when is it a responsibility of the company and when not
Alok Jain
Pat P.
Attorney, Legal/Business Services Consultant, Realtor, Real Estate Agent, Accredited Staging Professional
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My suggestion is for you to meet with a business attorney to discuss your specific business. Then, have the attorney prepare an operating agreement taylored to your business. Remember, you get what you pay for.
I'm only licensed in OH. Please note that this answer does not constitute legal advice, and should not be relied on, since each state and country has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
