Key Documents
Articles of Organization
Articles of Organization establish an LLC’s legal existence and are filed with the state. These typically include the LLC’s basic details like name, address and are a public record, accessed by anyone.
Operating Agreement
On the other hand, an Operating Agreement provides structure for the LLC, particularly in the case of multi-member LLCs, and guides internal operations. This document, not required by law but strongly recommended, is a contract between the LLC’s members and managers and sets forth rules and regulations governing the company’s management and decision-making.
Public vs. Private Documentation
- Articles of Organization: Public record that confirms the LLC is established and operating legally.
- Operating Agreement: A private document that outlines the LLC’s internal operations and helps resolve disputes among members.
Operating Agreements are advisable for clarity in the workings of the business and can govern the business rather than defaulting to state rules. They describe the economic and business arrangement of LLC members and often provide specifics on management, voting rights, profit distribution, and operations.
Functional Differences
While both documents serve important roles, they have different purposes and are not interchangeable. The Articles of Organization are a foundational document required for the legal existence of an LLC. The Operating Agreement is an essential internal governance document that governs the operations and management of the LLC. It helps prevent disputes and provides clarity in the event of disagreements or ownership changes.