Why every Multiple Member LLC Needs an Operating Agreement?
The LLC Operating Agreement is your limited liability company’s (“LLC”) most important document. The LLC Operating Agreement is the central document that is referred to when matters involving 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 amongst 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 them in the future.
A LLC Operating Agreement will also greatly reduce financial and management misunderstandings, and make sure your business is governed by your own rules -- not default rules created by your state. Defaulting to state law for important LLC decisions could jeopardize your business. It is crucial to have a LLC Operating Agreement if you don’t want the state to tell you how to operate your LLC. By having an Operating Agreement, you can decide the policies that will govern your LLC's inner workings, rather than having to default to state laws that may or may not be right for your LLC.
It is very important for a LLC to document important and material issues that could impact the members, such as the distribution of cash and decision-making rules involving the management and operations of the LLC. Without an Operating Agreement, the members will have difficulty settling disputes over the operations, economics, and management of the LLC.
