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The Rules On Establishing An LLC

Losing your personal assets can be a main concern when thinking of starting a business. Gaining profits is why people choose to establish a company, so why bother building something that can only cost you money? This is where Limited Liability Company or LLC comes in, the benefits of this type of business far outweighs any of its anticipated disadvantages.

One the many advantages of having this type of company established are the Operating Agreement. Whether it is a sole proprietorship or has many partners, through the operating agreement in an LLC business, you (and your partners, if there is any) can organize the percentage of ownership, each one’s own share of profits and losses, the rights and responsibilities, and options once a partner leaves the company. The operating agreement permits you the chance to form the financial as well as the working relations with every partner in a way that appeals to your business.

Although many states does not requires LLC businesses to have an operating agreement, it helps to have one because it is generally aimed in securing the limited liability status, intervene with misunderstandings (especially on financial and management issues), and makes sure that your company is lead by your own rules and not by the rules of the state alone. Among the many things that should be included in your LLC business Operating Agreement is:

  • Rules pertaining to meeting and taking votes
  • Allocation of profits and losses
  • Each partners’ voting powers
  • Each partners’ right and responsibilities
  • Each partners’ percentage interest in LLC
  • Buy-sell, or buyout provisions should a partner decides to sell his or her interest (or dies or disabled)
  • How the business will be managed

Albeit straightforward, each of these items are required to have some time for pondering and needs to be written in paper (so to speak) in your company’s operating agreement. It may be better to have the professional help of a business lawyer when creating the operating agreement of your LLC business. Whether you draft it from blank or getting help professionally, it should be made to benefit the needs of your company and adhere to your state’s laws. Seeking the guidance of a lawyer who focuses on business formation, contract negotiation, and contract preparation may help you in the  long run. 



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