Why do I need an Operating Agreement for my LLC?
An LLC operating agreement establishes ownership, rules, and structure for your entity. An operating agreement does not need to be filed with the state of Florida but should be retained by the LLC owners. When there is no operating agreement, Florida statutes outline the default rules that will apply to your LLC. Although an operating agreement is not required for your LLC in Florida, there are several benefits to having one.
These benefits include:
- Protection for your LLC’s status. A properly drafted operating agreement can help protect your LLC’s limited liability status by certifying your intent to separate your personal assets from the business.
- Creating operational and procedural rules. An operating agreement can create rules and guidelines to regulate how your LLC will be managed. The operating agreement will outline procedures so that actions and functions are performed consistently.
- Exit strategy. An operating agreement can outline an exit strategy for the owners and specify what happens if an owner wants to be bought out or if an owner dies.
- Avoiding default rules. Under Florida’s Revised Limited Liability Company Act, if there is not an operating agreement or the operating agreement is silent on specific topics, then the provisions of the Act will apply to the matter. Without a properly drafted operating agreement, your LLC will be subject to the default rules set forth by the state of Florida, which default rules may not best suit your intentions or needs.
An operating agreement is a legally enforceable document that is best prepared by an attorney. While free operating agreement templates exist online, an attorney can ensure that the operating agreement is properly drafted to avoid disagreements, tax issues, and preserve asset protection. More importantly, an attorney can draft the operating agreement to specifically meet your needs and desires (as opposed to “one size fits all” agreements found online). Every LLC has unique needs, and the operating agreement should address those needs. Furthermore, operating agreements need to evolve as your LLC grows, and a business attorney can advise you when changes may be necessary.