The Limited Liability Company Operating Agreement is like the body of law for an LLC business. They exist to preserve order and prevent disruption and chaos which can be fatal to your business. There are some things that are so important to have in your Limited Liability Company Operating Agreement. WHO OWNS HOW MUCH OF THE LLC I cannot tell you how many times I have seen a Limited Liability Company Operating Agreement that did not have provisions stating how ownership in the limited liability company is determined. You have started an LLC to build a successful business to create income and hopefully financial freedom for you and any of your LLC business partners. If you do not spell out who owns what and what you get for the ownership, then when the LLC business starts creating income and becoming of value, there will be dispute and disruption. Make sure ownership is clearly spelled out in the Limited Liability Company Operating Agreement. WHO HAS THE RIGHT AND OBLIGATION TO MANAGE THE LLC BUSINESS The Limited Liability Company Agreement needs provisions providing not only overall rules and specific processes for LLC business management. It should set forth who has the authority to operate the LLC and what obligations those persons have to the limited liability company and other members. WHO CAN BECOME A MEMBER OF THE LLC Most limited liability companies are formed to run a small business. As a result, you want to be able to control who becomes a member of your limited liability company as these are the people you will be working with to build your LLC business or who will have rights to profit in your LLC business. The Limited Liability Company Operating Agreement should guard against unwanted entrants to your LLC membership. Make sure there are proper provisions addressing the admission of a new Member. LIABILITY PROTECTION PROVISION Every Limited Liability Company Operating Agreement should have a provision that specifically states the personal liability protection afforded by the LLC to the Members. While the laws provide for this, many state LLC laws allow a limited liability company to alter the scope of the protection. Accordingly, if you want to ensure that each Member gets the most liability protection available under the laws, it is strongly recommended that the Limited Liability Company Operating Agreement spell this out with a specific provision that is agreed to in writing by all Members. Do not risk your protection with an incomplete agreement.
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