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A guide to LLC operating agreements

On Behalf of | Feb 8, 2023 | Business Formation & Planning

An LLC operating agreement is a legally binding document that outlines the operations and management of a limited liability company (LLC). It is a crucial document for any LLC in Virginia, regardless of its size or the number of owners. The operating agreement serves as a blueprint for the company and helps prevent member disputes.

What an LLC operating agreement includes

An LLC operating agreement is a key part of business formation and planning and typically includes the following key provisions:

  • Company structure: The structure of the LLC, including the number of members and their ownership interests.
  • Management: The management structure of the LLC, including the responsibilities of members and whether the LLC is member-managed or manager-managed.
  • Capital contributions: The amount of money or property each member contributes to the company and how profits and losses will be distributed among members.
  • Distributions: How profits and losses will be distributed among members.
  • Voting rights: The rules for voting on company decisions, such as whether decisions arise from a simple majority or a supermajority.
  • Dissolution: The conditions under which the LLC may be dissolved and how assets will be distributed among members.
  • Dispute resolution: The process for resolving disputes between members.

Why is an LLC operating agreement important?

An LLC operating agreement is important because it establishes the rights and responsibilities of each member. It also reduces the risk of disputes by setting clear guidelines for the company’s operations.

Furthermore, an LLC operating agreement protects the limited liability protection of the members by demonstrating that the company is a separate legal entity from its owners. It also helps secure funding from banks and investors by showing that the company is well-organized and has a clear operation plan.

Starting an LLC on the right footing

An LLC operating agreement is a vital document for any limited liability company. It outlines the company’s operations and management structure and helps prevent member disputes. If you are starting an LLC, creating an operating agreement is essential to ensure your company’s success.

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