What Is a Limited Liability Company (LLC)?

A limited liability company is a type of business structure.

The benefits of creating an LLC include:

• Limited liability, which protects the personal assets of its members
• Pass-through taxation, which means members pay income tax on company earnings, and not the business
• Enhanced credibility with customers, vendors, and partners
• A more flexible management structure than a corporation

What Is an LLC Operating Agreement?

An LLC Operating Agreement, also known as an operating agreement or LLC agreement, is:

• A document created by the owners, or members of an LLC
• A written record of the rights and obligations of the members
• A framework for how the LLC will operate, from membership
  rules to financial administration

Why Should an LLC Have an Operating Agreement?

An Operating Agreement is invaluable for an LLC because it:

• Formalizes your status as a separate entity, which is important for single-member LLCs
• Allows you to decide how your business will run, rather than being subject to your state's default rules for operating an LLC
• Helps to avoid misunderstandings over how profits will be distributed or how important decisions will be made

What Information Is Included in an LLC Operating Agreement?

An LLC Agreement addresses important company matters, including:

• Company information: location and type of services being provided
• Individual member information: name, address, and total value of contributions
• Membership rules, including whether new members will be allowed and whether they have a duty not to compete with the business of the company
• Meeting frequency: monthly, quarterly, annually, or as required
• Member voting power: equal or based on ownership share
• Management: the member(s) or an appointed manager
• Administration details, such as classification for tax purposes, division of profits and losses, and contents of the annual report
• Dissolution: whether the company will dissolve if a member leaves and how assets will be distributed when the company closes down

How Do I File My LLC Operating Agreement?

Make sure you know the difference between these two documents:

• An LLC Operating Agreement is an agreement between the members of the LLC. It doesn't need to be filed, but you should keep a copy for your records
• The Articles of Organization needs to be filed with the state in
  order to form an LLC