Starting a business can be an exciting experience, but it`s important to ensure that you`re setting yourself up for success. If you`re planning on launching a single-member limited liability company (LLC), then you`ll need to create a basic operating agreement.
An operating agreement is a legal document that outlines how your LLC will operate. It establishes the rules and responsibilities of the LLC and its members. Single-member LLCs are often overlooked when it comes to creating an operating agreement, but it`s still a crucial document to have.
In this article, we`ll take a closer look at what a basic operating agreement for a single-member LLC should contain.
1. Introduction
Your operating agreement should start with an introduction that outlines the purpose of the document. This section should also identify the name of the LLC, the date it was formed, and the name of the sole member.
2. Business Purpose
This section should outline the purpose of the LLC. It should clearly define the products or services that the LLC will provide and the target market it will serve.
3. Member Contributions
This section should outline the initial contributions that the sole member is making to the LLC. This can be in the form of cash, property, or services.
4. Management Structure
For single-member LLCs, management is typically handled by the sole member. However, it`s still important to outline this in the operating agreement. This section should detail the responsibilities of the sole member and any delegated authority.
5. Decision Making
This section outlines how decisions will be made within the LLC. It should outline the decision-making process for both day-to-day decisions and major decisions.
6. Profits and Losses
This section should describe how profits and losses will be divided. Since there`s only one member, all the profits and losses are assigned to them.
7. Dissolution
It`s important to outline what will happen in the event that the LLC needs to be dissolved. This section should outline the process for terminating the LLC and distributing any remaining assets.
In conclusion, having a basic operating agreement for your single-member LLC is crucial to protecting your business. This document ensures that you and your business are operating under legal guidelines and protects your personal assets in case of a lawsuit. Be sure to take the time to create a thorough and detailed operating agreement to ensure the success of your business.