An operating agreement is a legally binding document that limited liability companies (LLCs) use to outline how the company is managed, who has ownership, and how it is structured. If a company is a multi-member LLC, the operating agreement becomes a binding contract between the different members. The operating agreement can name the registered agent, give details like when meetings are held, select managers, and explain how the business can add or drop members. For non-profit corporations, bylaws are necessary for filing for nonprofit 501c3 tax exemption. Operating Agreements give LLCs the ability to govern their business the way they want rather than by default state rules.
Importance of Your Operating Agreement
Your Operating Agreement is one of the most important documents for your business. By keeping an Operating Agreement, members can refer back to a clear set of rules that they have already agreed to. It can help reduce arguments and disagreements down the line and save money and time spent dealing with misunderstandings.
Operating Agreement vs. Articles of Association
Is an operating agreement the same as articles of association?
No, an operating agreement is not the same as articles of association. While both documents are key to a business structure and legal framework, articles of association generally refer to the document that outlines the regulations for a company’s operations and defines the company’s purpose. An operating agreement, on the other hand, specifically governs the internal operations of the company, detailing the management, ownership structure, and operation procedures for an LLC.