Why an Operating Agreement is Key to a Successful Company
Tuesday, 13 September 2016
by Staff, Spaulding Law
1) It helps to ensure courts respect personal liability protection. To be effective, one must show that the entity is separate from the individual. Having an operating agreement and abiding by its rules is one way that an entity can show this separation.
2) It sets the structure and operating rules of your entity. It may spell out how profits will be split, how major business decisions are made, and procedures to be followed for changes relating to members, avoiding misunderstandings and disputes in the future.
3) Operating agreements allow customization of the rules of the entity to the satisfaction of the members rather than being governed by the default rules of the state, which may not be to your benefit or may not take into account the unique structure of your business.
It is impossible to foresee all of the issues your company may face down the road. Spending a little more money upfront for an operating agreement may save you a lot of money and headache in the end.
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