馃攳
What is the purpose of a LLC Operating Agreement? How IMPORTANT is it for your LLC? - YouTube
Channel: Helping Entrepreneurs Start Their Business! 馃殌
[0]
In today's video
[1]
I'm going to talk to you about
what an LLC operating agreement is
[13]
So you're probably watching this video
because you want to learn a little bit more
[17]
about how an operating
agreement affects your LLC
[21]
Hi, I'm Andrew from Mollaei Law,
where we help entrepreneurs
[25]
just like you start your businesses
without dealing with the complicated legal forms
[28]
our done for you Service is backed by over
2055 star Google reviews
[35]
and we can help you
start your business too
[37]
I am a recent law school graduate, and
I am currently awaiting my bar results
[43]
And in the meantime
[44]
I'm helping entrepreneurs just
like you start your businesses too
[47]
So, what is an operating
agreement?
[51]
An operating agreement is a document that works as
an instruction manual for your business
[57]
When forming a LLC
[59]
it is highly recommended that you
create one to protect your business
[63]
I'll go ahead and walk you through drafting an
operating agreement and discuss
[68]
why it is important to
have one for your LLC
[71]
What is an operating agreement?
[74]
An operating agreement
is a key legal document
[77]
Every LLC should put together in
order to clearly outline the rules and
[81]
regulations regarding
ownership and structure
[85]
as well as the financial and
operational layout for the company
[88]
Once all the members of an LLC have
signed the operating agreement
[93]
it becomes official and bonds
the signatories to its terms
[97]
If you are forming an LLC in California,
Delaware, New York, Missouri, or Maine
[102]
you are required to create an
operating agreement. Note, that no
[107]
state requires that you file an operating
agreement with the secretary of state
[112]
Your operating agreement is an internal
contract that you will keep with your
[116]
company records
[117]
Why is an operating agreement important?
[120]
drafting an operating agreement for your LLC
will help set up the organization for
[126]
how your company will be run
[128]
An operating agreement describes
the internal operations of the LLC
[133]
It details the formation of the business
and the procedures to be followed by
[137]
the business
[138]
The most important reason to have an
operating agreement or asset protection
[144]
having an operating agreement and
keeping records of operations helps
[148]
establish a separateness of the
business from the owner for liability
[153]
and tax purposes. If you don't
have an operating agreement
[158]
you will find it more difficult to show
that your business is separate from you
[162]
This is crucial, particularly if there
are or might be liability issues
[167]
assignments, and limitations of power,
such things include profit and loss sharing
[173]
ownership is one important key
[176]
The operating agreement will set the on
how ownership can be sold or purchased
[181]
and how the ownership
shares should be priced
[184]
It explains this solution handling or
selling an ownership when closing a
[188]
company or when a member's
leaving
[190]
Additionally, it will tell what happens if the
owner dies or is unable to run the
[195]
business
[197]
Your operating agreement should include
a clause stipulating who will manage the
[201]
LLC if you are unable to do so
[205]
Unless this specific
provision is in place
[208]
it may be difficult for your family to
continue the business or dispose of it
[212]
without a lengthy legal battle
[214]
Overall, it will alleviate disputes
among members and save you time
[219]
resources and trouble in case of
unforeseen events and difficulties you may face
[224]
So, who needs an operating agreement?
[227]
as I spoke about earlier,
the operating agreement
[231]
isn't a necessarily legal
document in every state
[234]
However, some institutions and professionals
may require to see a copy
[239]
Examples include banks, investors
[242]
and lending companies will need an
operating agreement to review financials
[246]
business structure
[248]
and look what the loan will be used for
accountants and tax professionals will
[252]
need an operating agreement for
tax and business record keeping
[255]
In the case of an audit, it will
be necessary for tracking purposes
[260]
Lawyers will need an operating
agreement to protect you from unfounded
[263]
accusations. If you are
involved in a lawsuit
[267]
if an LLC does not have
an operating agreement
[271]
it is subject to the default rules
of the state in which the LLC is organized
[276]
In other words, if you
don't have an operating agreement
[279]
you are essentially letting the state
tell you how to dispose of your business assets
[285]
What is included?
[287]
the contents of an operating agreement
[289]
may vary greatly depending on
the number of members
[292]
the nature of the business and the
ownership management structure
[296]
They commonly include sections on
organization and ownership, management
[300]
voting contributions, distributions,
compensations, and bookkeeping
[306]
article one of your operating agreement
[309]
A lot of the information you provide in
this section will be the same as your
[313]
articles of organization. I
recommend you have that on hand
[317]
The name of the LLC. This is
where you insert the exact name
[321]
You previously registered on the secretary
of state's website for the business
[324]
address of the LLC. This is your
principle place of business
[328]
the main location of your LLC
[331]
the address you provide in the operating
agreement, maybe an office space
[334]
you lease or own your home address
[336]
If you work from a home office
or a virtual business address
[341]
you also include the effective date of
the LLC. The birth date of your business
[346]
the registered agent of the LLC is
the name and mailing address of your
[350]
registered agent
[351]
This is a person who receives
notices on behalf of your business
[355]
All you're also going to include the
purpose of the LLC and explanation of why
[360]
you have established the LLC. This
doesn't have to be highly specific
[365]
The duration of your LLC is something
that's going to be included the length of
[369]
time. Your LLC will
operate stated in years
[372]
If you don't plan to end your
business endeavor, anytime soon
[375]
you can say perpetual
[378]
Next, I'm going to talk to you about
maintaining your operating agreement
[381]
Even simple changes such as an
address change should be noted
[385]
The best practice is to neatly store.
All important files, documents, receipts
[390]
and previous versions of the operating
agreement in a designated space
[395]
for complex changes. It is best
to hire professionals
[399]
Also, you should keep your records on
file for three to five years
[402]
The IRS States that in general
[404]
you need to keep records until the
period of limitations runs out
[408]
This applies to tax returns
and property related records
[411]
Some creditors, investors or insurance
companies may require you to keep the
[415]
records longer than the IRS does
[418]
If you happen to have any questions
about anything that I talked about
[422]
in today's video
[423]
click the link in the description box
below to schedule your free consultation
[427]
with an expert who can provide you
with more information on an operating agreement
[432]
And if you haven't already
[433]
please make sure you hit the
like and subscribe button
[435]
So you don't miss out on any future
videos. It's time to invest in yourself
[440]
It's time to rise
Most Recent Videos:
You can go back to the homepage right here: Homepage