An operating agreement outlines how a company operates. Operating agreements outline financial and functional decisions like rules and provisions. For LLCs, they are like corporate by-laws or partnership agreements.
They establish ownership interests, profit/loss management, and liability protection. Common sections include:
- Ownership percentage
- Voting rights
- Profit/loss distribution
- Buyout rules
Multi-member LLC operating agreements are binding contracts between members, outlining management, ownership, and structure. They can name the registered agent and outline meetings, managers, and adding/dropping members.
Having an operating agreement governs the company’s internal operations suiting the owners’ needs. Once signed, members are bound to its terms. Only three states mandate operating agreements. Otherwise, LLCs follow state default rules.
Templates help quickly create binding operating agreements covering duties, rights, voting, and shareholders. Well-crafted agreements protect parties involved and ensure stability.
FAQ
What is an operating agreement for a corporation called?
For corporations, operating agreements are known as corporate by-laws.
What is the difference between organizational agreement and operating agreement?
The text provided does not introduce the term "organizational agreement," therefore no comparison can be made based on the information given. However, it is common for the term to be used interchangeably with "operating agreement," particularly for LLCs, or to refer to documents that govern an organization’s structure that may not be an LLC or a corporation.