THE LLC OPERATING AGREEMENT - Part One

What are the key provisions and necessary clauses of a solid LLC Operating Agreement?

The rights of business partners or “members” as they are called in a limited liability company are not always easy to memorialize. The truth is, most business partners would say, at the beginning of going into business together, a handshake would be more than sufficient. In a perfect world, this would be true, but we don’t live in a perfect world and even the best of business partners need to protect themselves, their rights and their interest.

Here are two of the five most important provisions/ topics that must be covered in a basic LLC Operating Agreement:

Management/Voting – Who will manage the operations of the company? Some LLC’s are managed by the members (shareholders) of the LLC, while other companies are managed by a designated manager(s), who may or may not be an actual member of the LLC.

Initial Capitalization – Who will be putting up the initial start-up capital and what percentage of membership interest will that represent? It is important to understand and memorialize the amount of start-up capital that is put into starting an LLC and the percentage interest that will represent.

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