A limited liability company (LLC) membership operating agreement is similar to the bylaws for running a corporation. However, a good operating agreement makes it easier to run your LLC without a lot of the paperwork formalities required for a corporation.
Many business website owners use a LLC rather than a Subchapter S corporation as the entity of choice for their companies. If you’re one of them, your LLC’s membership operating agreement is your roadmap to getting things done easily but in a legal manner.
Why is it important to follow the terms of your membership operating agreement? Because it’s one of the key formalities you must observe to preserve the entity shield from personal liability in many matters faced by entrepreneurs in a sue-happy society.
Here are some of the issues your Internet lawyer will probably address when drafting your limited liability company’s operation agreement?
1. Will one member or all members manage your LLC?
2. What are the capital contributions made by each member?
3. Who makes decisions on behalf of the LLC and how are they made?
4. How do you add new members to your limited liability company?
5. What happens if one of your members decides to sell, retire, dies, or files for bankruptcy?
6. Will you use alternative dispute resolution to handle member spats? If so, what type, what law applies, and where will it occur?
7. When and how will your limited liability company terminate its existence and wind up its affairs?
Some states don’t require LLC membership operating agreements. Yet, as a practical matter, as your Internet business attorney can explain to you in detail, it’s difficult to run a limited liability company without such an agreement in place. If nothing else, your bank will probably insist on seeing the agreement as a condition for setting up your company accounts.