An operating agreement outlines finances and roles of LLC members. For multiple member LLCs, it should be advisable although not required. Get together with co-owners and a lawyer to figure out what to cover. Then answer simple questions and have everyone sign to make it legal.
Legal Implications
As a separate legal entity, an LLC can enter contracts, own property, and conduct business. Simply put, an operating agreement governs LLC operations. It provides key details like ownership and management structure. Most states don’t require one, but it’s recommended.
If you don’t create an operating agreement, your LLC could be subject to state laws not aligned with member intentions. The agreement helps maintain separation between company operations and personal assets.
Essentially, an operating agreement is a contract. Once signed, members are bound by its terms. It spells out financial and operational rules and provisions. The more specific, the better. Flexibility is also key – it should fit the LLC.
Even without being notarized, the document is still considered legally enforceable among the parties. However, some businesses will still have the signatures notarized to make things “feel” more official.
Notarizing a signature is usually required for any document that will be recorded on the public record. This is because the public recorder (usually the county recorder) will not record the document unless the signatures have been acknowledged (notarized).
Avoiding Legal Trouble
If LLC members don’t consult an attorney during the LLC formation process and never create an Operating Agreement, they usually must pay substantial sums of money to litigate issues they could have prevented with a well-written Operating Agreement. An Operating Agreement helps LLC members avoid costly legal troubles and, ultimately, protect themselves.
You won’t find these answers in your Articles of Organization, but an operating agreement can help you cover your blind spots.
The Easy Parts of Getting a Free Operating Agreement Template. Getting your hands on an operating agreement is a lot easier than most people think.
Should You Notarize?
Ultimately, whether to notarize depends on legal requirements and desired protection level. Extra security, but not universally mandated. LLC members should understand their options and seek legal advice.