It is tremendously important that your business documents are properly prepared regardless of the business type you create. For example, the LLC is a popular business structure because it provides personal protection but with less formality. When creating an LLC, it is important to consider a key document, the “operating agreement”. The operating agreement provides a structure within the LLC related to the business financials, rules, regulations, and other provisions.
The operating agreement has a number of functions including governing the internal operations of the business, binding its members to its terms, providing members with protection from personal liability to the LLC, clarifies verbal agreements, and protects the business from stringent state requirements that could take your business in a different direction if you fail to create an operating agreement.
Below are a few more items that need to be clearly outlined in your operating agreement:
Percentage of members' ownership
Voting rights and responsibilities
Powers and duties of members and managers
Capital Contributions
Distribution of profits and loses
Holding meetings
Membership Changes
Buyout and buy-sell rules (Dissolution)
This is not an exhaustive list, but it is enough to get you started. Make sure you consult Woodson Law to help you properly set up your business. You will need proper documentation and business records. This is not something you want to get wrong.
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