Understanding an LLC operating agreement

On Behalf of | Jun 14, 2022 | Blog, Business Law

Opening a new business in Pennsylvania involves many decisions. One of them will be the form that your new business should take. If you decide to form your business as an LLC, there are a few details to take note of. One of them will be to decide on the terms of your operating agreement.

An operating agreement will help you organize

There are many reasons why having a strong operating agreement in place is vital to the health of your business. After your initial business formation, you will need to have in place a set of special guidelines. These will be the rules by which your business is organized. They will also be the guiding principles by which you operate on a 24/7 basis.

Your initial operating agreement should begin with your basic company info, such as name, address, any DBA aliases you may employ, and the name of your registered agent. From there it should go on to outline the rules and procedures by which your company will operate. All of these should be committed to writing.

Each of the owners should provide info regarding their exact title and the responsibilities of their position. The exact ownership percentages of each member should be worked out in advance and included in the agreement. Tax info should also be provided in order to satisfy current and future IRS requirements.

An operating agreement will help you avoid disputes

It’s always a good idea to have an operating agreement in place to prevent discord from arising between the founders of your company. The agreement you sign can help you to avoid a wide range of disputes over such issues as succession planning. A solidly planned operating agreement can save a lot of time, energy, and money.

The agreement that you sign should be considered binding. If any changes are to be made, they will have to be agreed on by all or a majority of the owners. Doing so will help to keep your company running smoothly for years to come.

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