Some states may not require a company to have a business operation agreement, but the benefits from writing one far outweighs how a business can fare without it. For one, this operation agreement protects the company's limited liability status. This is especially important for those with only a single owner since without the formal agreement, the business might just appear to
be a sole proprietorship. For many businesses, having a formal written operating agreement lends credibility to their separate existence.
An operating agreement also allows a business to further define rules for itself in accordance to state laws. In some cases as well, though, the agreement can override default state rules that may not be favorable for a business. For instance, some states have implemented rules that require profits and losses to be equally divided among the company owners. This may be less than ideal if the owners of the company did not invest time and equal effort in establishing the business. Depending on what is needed, business owners should consult an attorney well-versed in business law to aid with the writing of the agreement so as one can properly define the rules that will best benefit the company.
In the writing of the agreement, certain issues must be addressed in the laying down of rules for a company. Depending on what the company needs, a few of the most common topics addressed by a business operation agreement are the members' percentage interests in the LLC, the members' voting powers, rights and responsibilities, how profit and losses will be allocated and how the company will be managed.
be a sole proprietorship. For many businesses, having a formal written operating agreement lends credibility to their separate existence.
An operating agreement also allows a business to further define rules for itself in accordance to state laws. In some cases as well, though, the agreement can override default state rules that may not be favorable for a business. For instance, some states have implemented rules that require profits and losses to be equally divided among the company owners. This may be less than ideal if the owners of the company did not invest time and equal effort in establishing the business. Depending on what is needed, business owners should consult an attorney well-versed in business law to aid with the writing of the agreement so as one can properly define the rules that will best benefit the company.
In the writing of the agreement, certain issues must be addressed in the laying down of rules for a company. Depending on what the company needs, a few of the most common topics addressed by a business operation agreement are the members' percentage interests in the LLC, the members' voting powers, rights and responsibilities, how profit and losses will be allocated and how the company will be managed.
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