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Creating your LLC operating agreement can prevent confusion

| Oct 24, 2019 | Uncategorized |

As you have probably figured out by now, a lot of paperwork goes into starting your own business. Even when you think you have the basics down and are ready to start operations, you will likely still have paperwork to fill out and file to ensure that your new business operates correctly.

You may have started your new company as a limited liability company. LLCs have many benefits, and choosing that structure made sense to you. You and your co-owners may feel as if you are seasoned decision-makers now because of the many choices you have made during your business formation journey, but the journey is not over yet. Now, you need to focus on your LLC operating agreement.

Agreements are important in business

When working with another person, multiple people or another business, having contracts and agreements in place can go a long way in preventing confusion and conflict. When it comes to an LLC operating agreement, you and your co-owners can use the agreement to detail many important details of your company’s operations, including the following:

  • The percentage of ownership each person has
  • The share of profits and losses each owner will have
  • Procedures for decision-making and meetings
  • A management plan
  • Procedures for transferring ownership in the event of an owner’s leaving or demise
  • Voting rights of members
  • Each person’s rights and responsibilities within the company
  • Rules for voting

In many cases, splitting everything equally among co-owners or other members is not the most equitable approach. After all, if one person contributed significantly more money to startup costs than someone else, that first person may deserve a larger percentage of ownership. Because such differences can cause strife if not explained well, having an operating agreement can ensure that everyone understands the necessary breakdowns and agrees to them.

Creating a legally binding agreement

When creating your LLC operating agreement, Tennessee laws regarding such agreements may need to be addressed. You certainly do not want any mistakes within your agreement to cause it to be unenforceable. Fortunately, you can work with a business law attorney who can help you with drafting this agreement and any future contracts you may need. Having this help can better ensure that your agreement complies with the law and that the information is clear and correct.