If you own a business, it’s vital to establish an operating agreement to ensure that it runs smoothly. The agreement is more than just a basic set of guidelines; it serves as the backbone for everything that you do and how you deal with business succession planning, workplace conflicts, business ownership responsibilities, and membership interests. Here’s what you need to know.

Operating Agreements FAQ

What exactly is an operating agreement?

Businesses depend on the fine-tuned behavior of many different parts to run smoothly. The operating agreement is an essential legal document that clearly outlines all the responsibilities of both owners and members associated with a limited liability company, or LLC. The document includes information about when the company was devised and who its members are, as well as who belongs to the board and how much of the business each person owns. It also addresses monetary contributions, profit and loss sharing, and how members are added and removed from ownership. It also explains the navigation process if the business were to dissolve.   

Why do individual LLC owners need one?

It’s helpful even for single business owners to establish an operating agreement, since it provides a clear blueprint of the foundation of the business and its operational procedures. This helps the owner follow a singular outline and best business practices. It also creates a distinct separation between the owner and the business, and can provide protections in the event of a business law issue. It also provides valuable information regarding business succession, which every single LLC owner must consider at some stage.

How does it impact business succession?

Devising a business succession plan is key to ensuring that your business remains in good hands long after you leave it. The operating agreement contains specific details that outline who will secure ownership of the LLC in the event of the original owner’s injury or death. Without this information, it could prove difficult for the LLC to avoid costly and time-consuming legal disputes.

What is the best way to create one?

Although it’s possible to devise one on your own, it’s always best to enlist the assistance of a qualified lawyer who has experience in business law. Templates and generic forms may not address every contingency, especially if the structure of your enterprise is complex. There are specific procedures you’ll need to follow to register your plan with the state. They’ll walk you through the intricacies of the documentation to ensure that you cover everything necessary to protect the future of your business.

A business law professional is essential if you’re concerned about matters relating to business succession. Trust in the experienced team at Zangari Cohn Cuthbertson Duhl & Grello P.C. in New Haven, CT, for your all your legal needs, no matter how complex. They’ll ensure that your business is run legally and that your documentation is properly designed. Visit them online for more information or call (203) 789-0001.