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What should you include in your LLC's operating agreement?

As is the case with many small businesses here in South Carolina, you chose to form a limited liability company when you started your new business. Now that you can legally operate, you may have thought that the paperwork part of starting up your business was over.

However, you need to draft an operating agreement. This document outlines the agreements among you and the other members of your company. It covers a wide array of issues that could arise among the members, along with matters such as who handles the day-to-day operations, who handles the money and more.

Issues covered in an LLC operating agreement

No two operating agreements are the same. Your business is unique, so your operating agreement will be as well. However, there are someĀ basic guidelines you can follow to help ensure that you cover as many contingencies as possible:

  • The name of your company
  • The company's formation date
  • The purpose of your company
  • The term, or length of time, the company will operate
  • The major terms and abbreviations of the company
  • The address and phone number of your business' principal place of business
  • The address and phone number of your company's registered agent
  • The way new members may join
  • The way current members may leave
  • The liabilities of each member
  • The contributions of each member
  • The fiduciary duties of each member, managers and officers
  • The management structure of the company
  • The process of selecting or terminating managers
  • The resignation process of managers
  • The restrictions on the manager or managers' authority
  • The dissolution process for the company

You may add any other provisions specific to your company, along with certain legal provisions that may become important in the event of a dispute among the members. The operating agreement may also help protect the company during those disputes or issues arising from outside the LLC.

Should you include anything else?

That depends on the nature of your business. It may help to include provisions specific to your business, but it may not be readily apparent to you what those issues are. You may not understand what language to add in order to helpĀ ensure that the agreement remains valid even under the scrutiny of a South Carolina court. You may find it helpful to seek out legal resources in your area to make sure that the rights of the business, you and the other members remain protected as much as possible by the operating agreement.

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