LLC Operating Agreements – Why This is an Important Step

Because business owners are drowning in paperwork as it is, many of them do the bare minimum when it comes to forming an LLC. The ones that get passed over are the LLC operating agreements. Although these are not required by the state, it is one of the most important forms you can complete. What this agreement includes is how you maintain your liability protection as an individual. It also is a great way to avoid disagreements when it comes to the different company members. What it details is all the rights, duties and obligations of each member.

Many people fail to put this in writing because the LLC operating agreements are not “required” by the state. Down the road they regret this step because they are having a disagreement with another company member. They cannot come to an agreement because both sides have their own opinion as to what should be done. Having it in writing from the beginning in this agreement is the only way to safely prevent and settle any arguments. The agreement also goes over whether the LLC entity will be managed by the members or by additional individuals. Just because it is not required by law does not mean that it will not benefit your company.

In addition to settling disagreements among the members, LLC operating agreements also can serve as protection of individual assets. In cases where individuals of a company are sued or taken to court, the opposing side tries to go after both the company and the individual. Without an operating agreement, you are not able to prove that you kept your business and personal life separate. When you do not have this agreement, it is the fastest way to lose your personal assets. It basically says that you are separate from your business entity, so your personal assets cannot be touched.

Because you receive so much protection with simple LLC operating agreements, it only makes sense to complete and adopt them, even if they are not required by the state. You are forming an LLC as a way to protect your business, so it only makes sense to do everything you can to protect yourself as well. Just because something is not required does not discredit its importance. Using an online LLC kit will help you easily form and adopt the operating agreement so you and your partners are fully protected for the future.

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