An operating agreement is similar to a partnership agreement and, as such, offers the freedom to create your own procedures and rules for the LLC. Operating agreements establish the management structure of the LLC, the voting rights of the members, the process of accepting new members, the distribution of profits and losses, the process of dissolution of the LLC and other rights and obligations of the members. Although operating agreements are not required in most states, entering into a company agreement has three main advantages. When you begin and review your original operating agreement or bylaws, make sure they make sense for your business and that the processes and procedures outlined in these documents are clear and concise. Ensure that important issues such as remuneration and the scope of the managing authority are established. Finally, make sure that each founder, board member or person has also taken the time to read and understand these documents. This way, everyone in the company can better understand the structure of your business and create a more favorable environment to start your business on the path to profitability. The operating agreement of an LLC is the contract that is entered into between all members (aka owners) of the LLC. LLC members usually have a lot of leeway in determining how they want to run their business. An LLC operating agreement can be as simple or as complex as you want.

It can be a framework on how the business should be governed – members` initial contributions (cash or in-kind), management responsibilities, accounting policies, and other basic understandings of how the business should operate.

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