WHAT IS AN OPERATING AGREEMENT? IS IT NECESSARY?
An operating agreement is any agreement, written or oral, between all of the members as to the affairs of a limited liability company and the conduct of its business in any manner not inconsistent with law. See California Corporations Code section 17001 for a more detailed definition. Yes, an operating agreement is necessary. Per California Corporations Code section 17050, either before or after filing the Articles of Organization, the members must enter into an operating agreement. While an operating agreement may be oral according to the law, there are too many details and legal issues involved to simple rely on a verbal agreement. Having a written operating agreement is the best way to protect your interests and avoid disputes with your fellow members.
