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An LLC operating agreement can be important to your company

Every day, you feel closer to getting your new business fully operational. You have already taken numerous steps in efforts to get everything in order, and it may have seemed at times as if you would never get your business off the ground. However, you are now closer than ever and can almost feel your company's doors opening for clients or customers.

Still, you and your co-owners are not quite there yet. You still have some paperwork to complete, including an LLC operating agreement. At first, you may have wondered whether creating an operating agreement was necessary, but it can be immensely useful to your company.

What are the uses of an LLC operating agreement?

You and your co-owners may have come to an agreement to create an LLC because of the tax benefits and other useful aspects of this type of structure. Now, you need to come to an agreement on how the LLC will operate. If you do not create this type of agreement, it is possible that Arizona laws can determine how certain aspects of your company operate. However, if you create your own terms, you may have the ability to bypass those rules. Consider the following details to include:

  • The company's management plan
  • The percentage of ownership each member has
  • The voting rights of the members
  • Rules for meetings and voting
  • Transitional procedures in case one owner leaves the business
  • Buyout and buy-sell rules for the business
  • Members' rights and responsibilities within the company
  • Details regarding the distribution of profits and losses

Depending on the specifics of your company, you may need to include other information as well. Having this breakdown of information in a clear agreement could ensure that your co-owners do not feel that one person is receiving unnecessary favor over the others. When everyone agrees to ownership percentages and other similar matters, the chance for conflict may decrease.

Creating your agreement

Of course, your LLC operating agreement is not a document that you should create yourself and simply have your co-owners sign. The agreement -- as with most contracts -- will need to meet certain stipulations to ensure that it is enforceable. Fortunately, you can reach out to an experienced business law attorney who could help you create your operating agreement and ensure that the information is accurate and enforceable.

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