Drafting and Amending Operating Agreements
A limited liability company (LLC) is a business entity that protects business owners, called members, from personal liability. An Operating Agreement governs the operations of a limited liability company according to the specific needs of the members. It is a legally binding contract for the internal functions of a business, guiding the member’s operational and financial decision-making process.
Although it is not state-mandated in Florida, it is wise for members of an LLC to set up an Operating Agreement. In the absence of this document, a business is governed by the rules imposed by the state, which may be very general or not appropriate for all purposes. It is a best practice for the founders of a business to create an Operating Agreement in the start-up phase of a business. However, one can be created or amended later as changes are necessary to meet the members’ needs.
Many legal issues may arise in the lifetime of a business, and experienced legal counsel is invaluable in drafting an Operating Agreement. Taking proactive steps by having a well-written Operating Agreement can help to avoid disputes and minimize disruptions to a business. The Downer Law has extensive experience in business law, negotiations, and courtroom litigation. With more than two decades of a commitment to assisting business owners, we offer professional insight for emerging and established companies in various industries.
Operating Agreement Topics may include but are not limited to:
- The mission statement of the business
- The percentage of ownership by each member of the LLC
- Each member’s responsibilities and voting rights
- Rules for the day-to-day operation of the business
- How company meetings are handled
- The tax structure of the business and the filing status
- The profits and losses allocated to each member
- Transition in members in the event of the sale, buyout, retirement, or the death of a member
- Procedures for dissolution of a business
The Importance of Revising Operating Agreements
It is time to amend the terms and conditions of an Operating Agreement when it no longer meets the members’ needs or the needs of the business. An agreement may have specific requirements and limitations for amendments, such as a timeframe before changes can occur or a needed majority or unanimous members’ vote. Common reasons to amend agreements include:
- an LLC name or mission statement modification,
- changes in LLC members, or
- other financial matters outlined in the agreement.
All amendments need to be documented and signed by the members.
Let Us Put Our Experience to Work for You
Contact the Downer Law if you are an entrepreneur starting up a business or a seasoned business owner that needs to draft or amend an Operating Agreement. We can help you create this critical governance document for your company that clearly outlines the members’ rights, responsibilities, and powers in making business decisions.