Operating agreements aren’t the first thing that most business owners think of in the summer. If you don’t have a seasonal business focused on summer, summer is often the time you are looking to slow down a bit. Get out of town, enjoy a vacation. Admittedly, it’s a lot tougher this year to plan out a summer vacation. But it can be done. If you’re able to get some time away, you probably don’t want to think about work. But if things are quiet in the office, now’s a good time to talk to your corporate attorney. With all the changes in the economy over the past few months, there could be a variety of effects on your business.
If so, now may be a good time to look at bringing in some investors to help you grow. Or maybe you could just use an infusion of cash to help you get through to the fall. No matter what your situation, those investors will want to see your operating agreements and other corporate documents before they will invest.
What’s In Operating Agreements?
Operating agreements are usually used for an LLC. Not surprisingly, it normally defines the operations of the LLC. It’s a close cousin to the by-laws of a corporation. The agreement sets out the agreement between the members of an LLC. It’s a document that most clients who meet with me know they need, but they haven’t figured out the form that they are looking at. It’s normally filled with antiquated language and complex legal terms that are confusing. Like an estate plan, an operating agreement should be tailored to each LLC. While you can generalize a lot of terms about an LLC, each LLC is different and requires customization in their documents. Some common issues to address are
- Purpose of the LLC
- Day to Day Operations
- Who are the members
- Duties of the members
- Management of the LLC
- Contributions of the members
- Process for a Member leaving the LLC
- What happens if a member gets divorced
- What happens if a member dies
- Liabilities of the members
- A dissolution process to close the LLC
There are many resources available to learn more about an LLC operating agreement. The library is full of books for business owners. Your state’s Secretary of State likely has a section of their website devoted to LLC’s and their operating agreements. And of course, for a small fee, there are any number of websites that will mail merge your information into an outdated form. But the best option is to sit down with a lawyer and discuss your company and what its needs are.
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Next Steps
If you’re considering setting up an LLC, or if you’ve done it yourself but aren’t sure what to do next for your operating agreement, give me a call and we can set up a Legal Strategy Session to discuss the process and some next steps to get your company’s documents in order – (877) AMAYERS.
