What is an operating agreement for an LLC?
An operating agreement for a limited liability company (LLC) is a document that outlines the financial and working relationships of all members of an LLC. The document notes each owner’s equity and involvement in the company.FeaturesWhile each operating agreement is tailored to the needs of an individual LLC, there is some content common to all agreements. This information includes ownership percentages, profit/loss sharing percentages and rights/responsibilities connected to running the business.BenefitsHaving a strong operating agreement allows members of an LLC to avoid management misunderstandings that arise in day-to-day operations.ConsiderationsWithout an operating agreement, an LLC will operate under the default rules of the state in which it is organized. While state laws vary, in some states, default rules may require profits and losses to be divided equally, without consideration of each member’s investment.SignificanceAn LLC operating agreement also helps owners plan ahead f
