LLC Operating Agreements

Starting a business is easy, but making it profitable is not.  To incorporate a business, all you have to do is file a form, and then you can get to work marketing your products or services.  When things go wrong, though, you often wish that you had more written agreements to rely on so that the courts would resolve the dispute on terms favorable to you.  More often, though, business debts follow you around for years after you have closed down the business venture.  The free information you find online makes it sound like you can easily protect yourself from personal liability for business debts simply by incorporating your business under the limited liability company (LLC) business structure.  In practice, it is not that simple.  The onus is on you to make your LLC protect you from personal liability for business debts and to formalize your rights and responsibilities in regard to the other LLC members.  For help drafting an LLC operating agreement that will enable you to manage conflicts and prevent avoidable financial losses, contact a Washington, D.C. small business lawyer.

Why Do You Need an Operating Agreement for Your LLC?

An operating agreement outlines the relationship of the members of the LLC to each other and to the LLC.  Maryland law does not require every LLC to have an operating agreement; you can incorporate your business under the LLC business structure and begin business activities even if you do not have an operating agreement.  Without one, though, your LLC will not have any advantages over other business structures.  If it is a single-member LLC, it will not provide you any more protection from personal liability for business debts than a sole proprietorship would.  If your LLC has multiple members but no operating agreement, then all of the members will be personally liable for business debts, and you will have to fight it out in court as to which business debts are the responsibility of which member.

What Should Your LLC Operating Agreement Include?

Your LLC operating agreement should include the name of the LLC and its members, as well as each member’s share of ownership interest and what happens to a member’s share of interest if he or she leaves the LLC or dies.  It should explicitly state that the members of the LLC are not personally liable for the LLC’s business debts; in other words, the corporate veil does not exist until the LLC operating agreement puts it in writing.  The operating agreement should also include procedures for voting, as well as how the LLC can remove a member.  Finally, it should include procedures for dissolution of the LLC, and it should indicate that the courts of the state of Maryland have jurisdiction to rule on disputes arising from the operating agreement.

Contact Tobin O’Connor Ewing About LLC Operating Agreements

A Washington, D.C. small business attorney can help you draft an LLC operating agreement or review an agreement that you have drafted.  Contact Tobin, O’Connor, and Ewing in Washington, D.C. or call 202-362-5900.

Source:

legalgps.com/forms/operating-agreement/md#:~:text=Do%20you%20need%20an%20operating,determine%20voting%20rights%20and%20contributions.