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What Is A Business Operations Agreement?

What Is A Business Operations AgreementThe term business operations agreement is a generic reference to the primary legal document for running your company.

It’s important to note that the names of this agreement will vary, particularly depending upon the type of entity you have formed.

For example, it’s common for a general partnership to have a partnership agreement, a corporation to have a shareholders agreement, and a limited liability company to use an operating agreement (sometimes called a membership agreement).

5 Common Issues Covered In An Operations Agreement

Regardless of the type of entity, here are some of the common issues you’ll want to cover in a business operations agreement.

1. Who Is Responsible For Running The Company.

2. What Important Issues Require The Votes Of All Co-Founders.

3. If There’s A Tie Vote, Who Makes The Ultimate Decision On An Issue.

Related Article: 50/50 Ownership Of A Business – Why It’s Often A Bad Idea

4. Restrictions On How Equity Can Be Sold And To Whom It Can Be Sold To.

5. What Major Events Can Force A Co-Founder To Leave The Company (e.g. bankruptcy).

Supplemental Operational Documents

There are business contracts and other legal documents that supplement a business operations agreement that must be taken into account. In some instance, these supplemental documents control if there’s a conflict with the terms or conditions of the operations agreement. In other in cases, the operations agreement will control if there’s a conflict.

For example, a corporation will have formation documents (e.g. certificate of formation or articles of incorporation), corporate bylaws, and may have various resolutions (or unanimous consents) passed by the Board of Directors or the shareholders.

Related Article: How To Protect Your Startup With An Equity Vesting Agreement

When it comes to ownership and control, there may also be legal documents, such as an equity vesting agreement or a shareholder proxy agreement that determines the amount of equity a co-founder owns or can vote.

Where To Get A Business Operations Agreement

Because your operations agreement is intended to be a binding contract between you and the other co-founders of your venture, you’ll want to have it professionally prepared by an experienced business attorney.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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