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All You Need to Know About LLC Operating Agreements

The LLC Operating Agreement is the written contract between LLC members. It identifies the rights and duties of the members and how they will run the company.

It usually contains the following information:

  • Basic details about the company. This includes name, address, duration (if applicable), etc.
  • LLC members. It will list all the LLC members with their details, and how much each one of them owns of the company (percentage).
  • Initial contributions. If members invest capital in the company, it will be listed in this part of the contract. In many cases, it will be zero, but it still needs to be stated here.
  • Statement about taxes. LLCs founded by US residents can choose their taxation method, but if you are a non-citizen and non-resident, it does not apply to you.
  • Voting rights. They usually follow the percentages of the owners, but if the members hire a manager or appoint one member as the manager, the voting rights change and it needs to be clearly described.
  • Rights and duties of the members. Members are free to determine their rights and duties in this contract in any way they find suitable.

A few more things that you need to know:

  • Even if you are a single member of the LLC, banks will ask you for the operating agreement. Yes, it sounds like having a contract with yourself, but they still want to see it. Also, if you ever go to court, it will help the court recognize the corporate veil between you and your LLC.
  • In the case of a dispute between the LLC members, the Operating Agreement is the contract that governs their relationship and any disputes will be resolved according to this contract. That’s why it is important to set it right. If you see a significant risk of dispute, it is advisable to get a lawyer draft one for you.
  • The Operating Agreement is not obligatory. It is required to be submitted in the Company Register in many countries, but not in the State of Wyoming. It is recommended to have one, but not required.
  • The Operating Agreement does not need to be notarized. It is enough only to sign it. 
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