LLC Answers

Unfortunately, the LLC laws of most states do validate oral llc agreements for a limited liability company. So, technically, an oral LLC agreement is valid.

There are some limitations under general contract law.  For example, there is the concept of the statute of frauds which requires that certain agreements be in writing. A recent Delaware court case involved an oral LLC agreement and held it invalid not under the LLC laws but under the statute of frauds/contract rules.

Practically and legally speaking, an oral agreement governing the relationship between LLC members and the operational requirements of a business is just a recipe … Continue Reading

PODCAST:

I recently put together a short audio recording for a group of entrepreneurs that wanted to know if their limited liability company entities needed an LLC Operating Agreement and if so, what this document accomplishes for their LLC busineses.

Listen to this 3 minute recording and you will get these answers and essential information about what you need to properly customize your LLC operating agreement.

 

 LLC Operating Agreement- Why It is Important: Play Now | Play in Popup | Download

Every llc operating agreement should contain a section which outlines what is required before a new member can be admitted to the limited liability company.  These provisions will apply not to the initial members when the business is started, but later on in the event the business wants to bring in a new person as an owner.

The first and most important requirement is to set forth what approvals are required by the existing members. There is no one best answer to this.  Some will want to require that every member approve the new member while others may only require a … Continue Reading

There is a common question among LLC business owners as to whether a single member LLC operating agreement is even needed or desirable for a single member LLC.  After all, why have requirements where a sole member has to abide by processes and rules to get agreement to and from himself or herself.

Well, the answer to this is because the way the limited liability company laws are set up, a single member LLC is still a separate legal entity from its sole owner.  As a result, it needs to have its own personality and be its own person.

If there … Continue Reading

A limited liability company agreement is the operating agreement for your LLC business.  It is not meant to be signed once and then forgotten.  Ideally, you should amend and update it anytime there is a change that is required to be reflected in the provisions of the agreement.

There are two ways to update an operating agreement.  This first is with a written amendment.  These are tricky and you should make sure the amendment refers to the underlying limited liability company agreement and has clear language as to what has changed or updated from the old one.  The most important requirement … Continue Reading

The limited liability company agreement is the key document for your LLC business. But, in order for it to be honored, every member of the LLC should agree to be bound by every provision of this agreement.

How do you do this?  Just follow these steps and you will take care of this requirement:

1. When you adopt your first limited liability company agreement for your LLC, every person who is a member of the LLC at that time MUST sign the agreement.

2. The agreement for your LLC must include a provision in the section of New Members that a condition for … Continue Reading

No.  You must do your homework and insist on using a reputable and useable LLC Operating Agreemnt form as a starting point for the Operating Agreement for your limited liability company.

The form structure, language and topics covered in a sample operating agreement (form) is very important because this agreement serves as a users manual for the managers and officers of a limited liability company. If you start off with a substandard or improper form, you are only asking for trouble.

I have looked at many form operating agreements available on the Internet and it is obvious that many of them were not … Continue Reading

Many LLC owners ask me whether or not it is necessary for them to have an Operating Agreement for their LLC. After all, in most states, a written Operating Agreement is not required to have an official and proper limited liability company.

This is the one question I will always answer the same regardless of who is asking.  You must always have a written Operating Agreement for an LLC business. There are several reasons for this.

First, having an operating agreement buttresses your liability protection.  It is a solid sign that the LLC is an entity separate and apart from owners which is … Continue Reading

Aside from the documents required to form a limited liability company under state law, the LLC Operating Agreement is the most important document for a limited liability company.

The LLC Operating Agreement generally accomplishes two major things but it can be much more.  The two major purposes: (i) evidence the ownership of the limited liability company and the rights and obligations of the members to each other and the LLC; and (ii) impose a governance structure which is a set of rules addressing how the limited liability company will govern itself and operate in a day to day basis.

I.  ESTABLISHING OWNERSHIP … Continue Reading