Many ask whether an operating agreement for LLC is necessary for a limited liability company. In my opinion, it would be disastrous not to have one. Think of a country without any laws or rules. . . or a school run without any limitations on what administration, students and teachers can do.
A business has a goal of making a profit and in order to do so, the different stakeholders, whether they be owners, managers, employees, partners or even suppliers, need to know how the LLC business operates and what it is authorized to do. Owners need to have separate evidence of what exactly it owns and what rights and obligations they have to the business.
The Operating Agreement for LLC addresses these matters and once adopted, it is the official governing document and user manual for the entire operations.
One other important point is that one of the largest benefits of a limited liability company is its protection shield for owners. Owners are not personally liable for the business obligations of the LLC as long as it is the LLC and not the owners in their personal capacity running the business.
The best way to provide evidence that it is the LLC running the business is via the operating agreement. This gives the legal entity a personality and a set of governing rules. This establishes the separation. And, this is what will allow you to ensure you are protected if your personal liability were ever challenged in court.
In summary, an operating agreement for LLC provides governance for the entity, clarity and guidance for all stakeholders and protection for owners.
CLICK HERE to Learn More About the LLC Operating Agreement.
