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  • Steve Schilling

Operating Agreements: The Foundation of Your Limited Liability Company

An operating agreement is the governing document for limited liability companies because it outlines the business' financial and functional decisions including rules, regulations, and provisions. The purpose of an operating agreement is to govern the internal operations of the business in a way that meets the specific needs of the business owners. Once the operating agreement is signed by the members of the limited liability company, it acts as an official contract binding them to its terms.

One purpose of an operating agreement is to protect the business' limited liability status. Operating agreements give members protection from personal liability to the LLC. Without this specific formality, an LLC can closely resemble a sole proprietorship or partnership, and potentially expose the LLC’s members to personal liability.

An operating agreement also serves to memorialize and clarify verbal agreements among the members. Often members of an LLC will orally agree to certain terms regarding the LLC’s; however, misunderstanding or miscommunication can and do occur. It is always best to have the operational conditions and other business arrangements memorialized in writing so they can be referred to in the event of any conflict.

If you need help drafting an operating agreement for your LLC, give our attorneys at The Kyle Law Firm a call at: 225-293-8400.

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