Does My LLC Need an Operating Agreement?

An Operating Agreement is an important document that governs your relationship with the other owners of your LLC and third parties with whom you do business. In other words, you can set the “ground rules” for the management of an LLC in your Operating Agreement and can help to avoid disputes about who has the authority to act on the business’s behalf.

Operating Agreements can also serve to show third parties that you, another owner or employee of your LLC has authority to sell property or enter contracts for the LLC. In some cases, such as a sale of real estate, the buyer or Title Company may require your LLC to produce an Operating Agreement as a condition of the sale or issuance of an insurance policy.

Finally, your Operating Agreement can dictate the procedure for the admission of new owners or the purchase of a departing owner’s interest. This allows you as an owner to control who you become partners with if another owner leaves the business.

If your business is in the form of an LLC, you should be sure to have an Operating Agreement drafted to protect your rights and so your business is prepared for purchases and sales of property.

Attorney Benjamin M. Forbes can assist you with the formation of your Limited Liability Company. Call 570-622-5933.