Hinsdale Operating Agreement Attorneys
An operating agreement works as the foundation of your business. This legal document will outline the governance and operational framework of your LLC, providing essential clarity and structure for its members.
By clearly defining each rights and obligations, decision-making procedures, and a fair profit distribution, your LLC’s operating agreement will protect the interests of your business and prevent legal disputes.
Furthermore, having a comprehensive operating agreement will enhance the credibility of your business in the eyes of potential investors, partners, and financial institutions.
With Motiva Business Law’s contract attorneys, you will have peace of mind knowing that your Illinois LLC has a stable structure, transparent policies, and is prepared for growth.
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What is an Operating Agreement?
An Operating Agreement is a legal document that outlines the controls, internal workings, governance structure, and financial arrangements of a limited liability company (LLC). It is usually a 10-20-page document that serves as a foundational framework for how the LLC is managed and operated.
The owners of an LLC are “members” and their ownership in the LLC is often referred to as “membership interests”. It is highly recommended that the members of an LLC enter into an operating agreement at the time of forming the LLC. Many states require an LLC to have an operating agreement, and even if not mandatory, having one provides clarity and prevents potential conflicts or legal issues for the members of an LLC before they escalate.
Common misconceptions about Operating Agreements
- Single member LLC does not need to have an operating agreement.: The number one common misconception about operating agreements is that some people believe that operating agreements are only necessary for multi-member LLCs. In reality, even single-member LLCs can benefit from having an operating agreement for the following reasons:
- Without an operating agreement, your state’s default rules that are set by the state will apply to your LLC, which may lead to unwanted results by some LLC owners.
- Banks and investors might want to see your operating agreement as proof that you own your LLC. Not having an operating agreement may make it much more difficult or impossible to obtain finance via the LLC.
- A well-drafted operating agreement helps to protect its members’ personal assets from the LLC.
- Standardized Templates are sufficient: Some LLC owners may believe that using standardized templates found online is sufficient for creating an operating agreement. However, each LLC and its members are unique, and a one-size-fits-all approach is never adequate to address the specific needs, goals, and complexities of the LLC.
- An Operating Agreement is a one-time document: Another misconception is viewing the operating agreement as a one-time document created at the formation of the LLC. In fact, the agreement should be a dynamic and evolving document that is periodically reviewed and updated. Changes in membership interest, management rights, operating procedures, and contribution may necessitate amendments to the operating agreement to keep it relevant and effective.
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why leave your operating agreement in the hands of our attorneys
- Legal expertise: An attorney with experience in corporate law can provide legal expertise to draft an operating agreement and assist you with other legal matters related to forming an entity. Make sure that your entity aligns with state laws and meets any unique requirement of the industry you intend to serve.
- Customization.:We tailor the operating agreement to the specific circumstances of your LLC, considering its industry, size, and its members’ dynamics.
- Conflict Prevention: We provide legal advice that helps to anticipate potential issues, prevents conflicts between the members, and ensures the operating agreement is comprehensive and clear.
- Legal Guidance: Our attorneys provide legal guidance on forming, governance, financial arrangement, compliance matters of new and existing LLCs.
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Operating Agreement Frequently Asked Questions
Without an operating agreement, your LLC is subject to default state laws, which may not align with the specific needs and goals of your LLC.
Yes, an operating agreement can be amended.
It protects your personal assets from the liability of your LLC by defining the limited liability structure, and establishing a separation between the business and personal finances of the members.