Operating agreements are fundamental documents for LLCs, especially those that involve two or more business owners. In Florida, they help ensure that the legal rights and protections for all business owners are upheld. As an added benefit, they can also help reduce future conflict by codifying the terms of the relationship and specifying the path for dispute resolution if an issue were to arise.
What is an Operating Agreement?
The purpose of an operating agreement is to specify the financial and functional decision-making for the business. Items typically included are things like how ownership is divided, voting rights and responsibilities, ownership duties and powers, profit and loss distribution, buy-out and sell-out provisions, and more.
Capital concerns are also very important to address, such as who will be providing what in terms of financial backing. For example, what happens if additional capital is needed if the company were to be hit with a lawsuit, and how might that impact one’s business interest?
Who Has What Rights?
In terms of decision-making within the organization, understanding how power is divided among owners is paramount to preventing disputes. Your operating agreement should spell out answers to questions like the following:
- Who has the right to make what decisions?
- Can one owner get a loan without their business partner’s consent?
- Can one owner sell their shares or interest to someone else without talking to or offering it to their partner first?
- What rights does the manager of an LLC have, and how are those rights determined and upheld?
Your LLC’s operating agreement should be fair and equitable, and though it can be amended down the road, it’s advisable to create as thorough a document as you can right from the outset. Our team at the Law Offices of Alex D. Sirulnik, P.A. can help. Contact us today to schedule a consultation to discuss your business goals and priorities.