What information should be included in an operating agreement?

On Behalf of | Jul 13, 2021 | Business Transactions |

There is a lot involved in getting a limited liability company up and running. Creating an operating agreement is just one of the many things owners of LLCs may want to consider completing during the formation process. Whether one’s company is a sole proprietorship or a partnership, an operating agreement can offer various protections for the company and all business owners.

What exactly is an operating agreement?

Some people consider this agreement similar to company bylaws. It is an in-depth document that lays out governing rules for one’s business. While an operating agreement is not required by the state to open a business, it is still wise to have. Without one, if the company ends up closing, owners have to abide by state default rules when dividing profits and losses. Who wants that?

What information should be included in this agreement?

An operating agreement can cover a lot of ground. There is no hard and fast rule about what should be included in this contract. However, certain things would be smart to put in. Here is some information one might want the agreement to cover:

  • Rights and responsibilities of all owners
  • Percentage of ownership assigned to each owner
  • Share of profits and losses
  • How to handle the dissolving of a partnership
  • A management plan
  • Member voting rights
  • Buy-sell or buyout rules

Whether Louisiana business owners choose to create operating agreements is completely up to them — as is the information they choose to include. Setting up an operating agreement doesn’t have to be a difficult thing to do. An experienced business law attorney can help one create an agreement that offers all the information and protections one needs.