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Everything you need to know about LLC operating agreements

On Behalf of | Sep 19, 2022 | Business Law

Creating a limited liability company in Indiana comes with several benefits, such as being able to protect your personal assets from business debts and liabilities. With an LLC, you can also elect to have your business taxed as a corporation. However, one of the key components of forming an LLC is creating an operating agreement.

What is an LLC operating agreement?

An LLC operating agreement is a legally binding document that outlines the ownership and operating procedures of your LLC. One of the things that an operating agreement should include is how the LLC will get managed. Will all of the owners (known as members) manage it or will there be a designated manager? The operating agreement should also include what happens if a member leaves the LLC, dies or becomes disabled. Last, but not least, the operating agreement spells out how business decisions will be made and what happens if the members can’t agree per business law.

Do I need an operating agreement?

While you’re not required to have an operating agreement for your LLC, it’s a good idea to create one. An operating agreement can help prevent disputes among the members of your LLC and sets out everyone’s roles and responsibilities in the business. It also helps prove to the IRS that your LLC is a separate business entity.

How do I create an LLC operating agreement?

If you’re forming a single-member LLC, the process is pretty straightforward. You’ll just need to draft up your operating agreement and have it signed by yourself. For multi-member LLCs, the process is a little more complicated. You’ll need to hold a meeting with all of the members to discuss and agree upon the terms of the operating agreement. Once you’ve done that, have everyone sign the agreement.