Your LLC operating agreement is an important contract that should not be simply downloaded and put into service. Why is an LLC operating agreement so important and why do most new LLC members and entrepreneurs miss this important document? Many legal download sites provide new business start-up packages which are supposed to help you save a few dollars when starting a new business.
You Need an Experienced Business Attorney to Tailor Your LLC Operating Agreement
The fact is there are many important terms, clauses and options in the corporate documents of your LLC. The operating agreement establishes how the relationship between the company’s owners will be managed. There are many specific issues to be addressed and the unique clauses and sections associated with these documents can determine your LLC’s success or failure.
Your LLC operating agreement is an important contract that establishes how each member in the LLC will conduct themselves, how profit is to be calculated and disbursed, the voting shares of each member and the responsibilities associated with their position in the company. An effective LLC operating agreement should also provide for the succession of the LLC in the event of a major life development for one of the members such as:
- Divorce
- Incapacity
- Death
- Personal Bankruptcy
- Inability to Fulfill Financial or Business Duties
These events trigger a need to value the ownership shares of the LLC and provide a mechanism for protecting the balance of ownership in the company and the rights and interests of each member during these business and life-altering situations. There are also considerations regarding minority ownership interests and California law. Recent legislation changed the balance of power between members in favor of minority positions unless these issues are clearly defined within the operating agreement.
Finally, you may be limited to the types of deals and transactions you can do outside of the LLC unless these powers are provided within the operating agreement. You may be accused of acting outside of the duties of loyalty and good faith if you do not bring those opportunities to the LLC instead of pursuing them on your own. It is important to work with sound business advisors who have decades of experience and expertise in your area of business.
Your LLC Operating Agreement is an Important Contract and is as Unique as Your LLC Itself
Your LLC operating agreement is an important contract and should be custom tailored to the unique circumstances of your LLC and it’s ownership. The Watkins Firm doesn’t create these important contracts from scratch. That would be too expensive and take way too much time.
The Watkins Firm has served the San Diego and Southern California business community for more than 40 years. We have developed a proprietary library of contracts that are proven and battle-tested. We take a proven contract and custom tailor it to your unique situation. Our experienced San Diego business attorneys sit down with you to discuss each option as well as the purpose for every clause and option.
Taking the time to get the LLC operating agreement right up front will not only significantly increase the likelihood of success for your new company, it can virtually eliminate the opportunity for a dispute or lawsuit between the members down the road.
If you are forming an LLC, have used a boilerplate downloaded form, or have multiple members without an operating agreement we invite you to review our podcast Episode 3 – Corporate Documents as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
