An operating agreement is a key document used by limited companies to outline the financial and functional decisions of the business, including rules, regulations, and provisions. The purpose of the document is to manage the internal operating of the entity to suit the specific requirements of the owners.
It is a legal document that has a form and content varying widely, but, mainly it has key articles: Organization, Management and Voting, Capital Contributions, Distributions, Membership Changes, and Dissolution.
The first part of the operating contract is related to the establishment of the company. It covers when the company was founded, who the members are, and the ownership structure. If there is more than one member, they may all be equal ownership or a different amount of “ownership units”
- Management and Voting
This section discusses how the company is managed and how members vote. It is the case that the company may be managed by one of the members appointed by the members. The operating agreement determines what authority the members have on the company affairs. The decisions may be made through a voting process among the members. The operating agreement may determine the number of votes required by the company for certain actions.
- Capital Contributions
This part is about the money given by the members to start the Limited Liability Company. It covers which members have given the money to establish the company. It also covers how the members will raise extra money.
This part shows how the company’s profits and losses are shared among the members. This money may include physical property or other commercial assets.
- Membership Changes
This part is totally about the process of adding or removing members. It covers what might happen in the case of the transfer of company ownership. For instance, the company determines what happens if a member dies or goes bankrupt etc.
In this part of the operating agreement, explain in which situations the company should be dissolved. This is sometimes called “wind up”.
Although most states do not require an operating agreement – still we highly recommend it for multi-member LLCs since it structures the finances and organization of the LLC-, it is mandatory in Delaware State of the USA.
Minutes are records / detailed notes that are taken during a meeting of the members or owners of a Limited Liability Company (LLC).
You should note that the first meeting (when the company is first formed) of the LLC is very important in helping to organize all aspects of the business.
Date, time, location of the meeting, results of any voting held, any changes and updates on the goals and business, management structures should always be the issues that meeting minutes include.
If you need any help with the operating agreement or minutes, simply contact us!