Limited Liability Company


An LLC needs an official governing article that will establish all rights, responsibilities and rules for the company. This can be accomplished with an operating agreement.

To be certain your limited liability operating agreement has all it needs, read on for a checklist of the items required in the document. This will help you to properly address the vital rules of operation that will prevent future problems and avoid unnecessary costs to your business.

One- Purpose of LLC Entity

The first item you should address in your operating agreement is a provision that lays out a definition for the company's purpose. It is usually best to write the business purpose in the broadest language possible, allowing your company to engage legally in many different business activities. In some situations, you might wish to limit how much authorization your grant for particular activities.

TWO-Financial Terms

The second essential aspect of an operating agreement addresses financial obligation details for particular members. This section will also spell out the membership rights given. Be sure to detail at what point members earn rights to distribution of profits, with the related tax matters.

When it comes to what financial rights and obligations are required, it is key that your agreement covers these matters completely. People sign up and agree to contribute money and efforts to an LLC business in exchange for these rights so the last thing you want is misunderstandings in this area.

THREE- Membership Issuances and Transfers

Most LLCs are used for small businesses where the owners want to control who becomes owners and managers of the business. These membership provisions are very important to ensure business continuity and accord.

FOUR-Management Matters

The limited liability operating agreement must set forth operational rules for how the business will operate on a day to day basis. This section should also describe who has authority to act on behalf of the company and what votes are necessary for company action.

FIVE- Termination

The fifth and final vital aspect in your operating agreement addresses the company's lifespan. Companies can be perpetual, but there may be practical reasons when it is logical to dissolve the business. A proper operating agreement contains a provision with the methods needed to dissolve the company.

The limited liability operating agreement is the most important document for your company once it is formed. Make sure that you have a proper and complete agreement and beware of using incomplete or unprofessional forms as a starting point.

Click Here for a FREE Report: Tips to Ensure You End Up with a Proper Limited Liability Operating Agreement