The Operating Agreement vs. The Articles of Organization
The Articles of Organization (in some states this document is called a certificate or organization or certificate of formation) is an organizing document that is filed with the state limited liability company (“LLC”) filing office. Whereas, the LLC Operating Agreement is the core document that is referred to when issues concerning the LLC need to be resolved. The LLC Operating Agreement reflects the agreement among the members with respect to the affairs and management of the LLC as well as governs the relationship among the members of the LLC. By having a LLC Operating Agreement, the members will be provided with a clear set of rules that all members have agreed upon, greatly reducing the likelihood of disagreement between members in the future.
A LLC comes into existence when its Articles of Organization are filed with the state LLC filing office. Any person can file the Articles of Organization. This person need not be a member of the LLC. In other words, the Articles of Organization is essentially a formation document that is filed with the state LLC filing office to form an LLC.
The LLC Operating Agreement does not have to be filed with any state agency. By having a LLC Operating Agreement, the members will be provided with a clear set of rules that all members have agreed upon, greatly reducing the likelihood of disagreement between members in the future. A LLC Operating Agreement will also greatly reduce financial and management misunderstandings, and assure your business is governed by your own rules, not default rules created by your state.
All statutes allow a LLC to adopt an Operating Agreement and will give the Operating Agreement full force and effect. The operating agreement will only be enforced against the persons who are parties to the agreement. Therefore, it is extremely important that all members of a LLC sign the operating agreement.
