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What an Operating Agreement Should Include to Reduce Business Disputes


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1/22/2013
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If you have set up an LLC and are a small business owner, then you must know how important it is to have a well-drafted operating agreement in place to protect your company’s interests. Although you know that you need an operating agreement, you may not know what the document needs to contain. 

Examples of subject matters that an LLC operating agreement should include:

  • Ownership – documents each members’ percentage interests in the LLC (who owns what percentage of the company) and how profits and losses will be allocated
  • Rights and Responsibilities – discusses how the LLC will be managed, what each member’s responsibilities are, and rules for taking votes and holding meetings
  • Voting Rights  – states each members’ voting powers and what percentage of votes are needed to make certain decisions, such as adding new members and amending the operating agreement
  • Termination – sets forth how an existing member can be terminated from the company
  • Buy-Sell Provisions – states what happens when an owner dies or wants to sell his or her shares, how is the price determined, and if the existing members get the right to first refusal

By setting up an operating agreement for your LLC, you will be able to avoid future disagreements with members over decision-making, profit-sharing, handling the departure or addition of members, and overall finances and management concerns. Without an operating agreement, businesses may be dragged into expensive litigation to resolve a business matter.

For help with creating a thorough operating agreement or other business contracts, call The Posey Law Firm, PC toll free at 888-269-1962 or locally at 512-646-0828 to talk with an experienced Texas business attorney today.



Category: Small Business and Contracts


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