An LLC operating agreement is a document that establishes the rights and obligations of members of an LLC (limited liability company). This document is essential to defining how the LLC will operate, be governed, and how profits will be distributed. If you’re an LLC member, it is strongly advised that you create an operating agreement for your organization.
An experienced Houston business law attorney can guide you in drafting and executing this important document. That’s where the Oracle Legal Group comes in.
What Should Be Included in an LLC Operating Agreement?
One of the main functions of an operating agreement is to clearly define the rights and expectations of LLC members. This goes a long way in avoiding misunderstandings and minimizing the likelihood of a dispute, and therefore litigation.
Although every LLC operating agreement will vary in its details, most will contain at least the following elements.
- How much each LLC member will contribute in terms of capital, cash, assets, and services
- The percentage of the company each member owns based on his or her contributions
- How profits and losses will be distributed among members
- Each member’s rights and obligations, including voting rights, management duties, and future. contributions to the company
- Rules and protocols concerning member meetings
- How the shares of a departing or deceased LLC member will be purchased or transferred
- How the LLC may be dissolved
It is important that you discuss the terms of the operating agreement with a Houston business lawyer. There may be other documents, such as covenants, that should be drafted and executed along with the agreement. We can talk about those with you.
The Risks of Not Having an Operating Agreement
Even if you are a single-member LLC, it is recommended that you create an operating agreement. You may wish to eventually grow your business, and the operating agreement gives you control over how that would occur. Without the agreement, Texas law will dictate in a manner you might not like.
Risks are even more pronounced for multi-member LLCs that don’t have operating agreements. As with single-member LLCs, Texas law governs matters that are not addressed by an operating agreement. This may result in an outcome that is detrimental to your and the other members’ business interests.
On the other hand, a dispute could arise among members if certain terms are not defined. For instance, how exactly should LLC profits be distributed among its members? If there’s no clear agreement, the matter could end up in court.
How a Business Lawyer Can Help With Your LLC Operating Agreement
When you retain Oracle Legal Group to draft your LLC operating agreement, we examine the interests and concerns of each member. Then we get to work drafting the terms of the agreement. As each member reviews and considers the agreement, terms may be added or taken away. We can answer questions, make recommendations, and explain the legal consequences of various terms (or the absence of them).
Ideally, a substantially detailed agreement will eventually be drafted. This final product should address all or most issues that are likely to arise in the life of your LLC. At this point, the agreement is executed and put into effect.
Talk to a Knowledgeable Texas Business Attorney Today
Oracle Legal Group can provide assistance with operating agreements and much more. Whether you have an LLC or some other type of business entity, we’re ready to help. Our goal is to give your Houston business the peace of mind that legal matters are being properly handled.
To get started with drafting your operating agreement, contact Oracle Legal Group today.
