Forming a limited liability company (LLC) is a popular choice for entrepreneurs because it provides liability protection and flexibility. However, one crucial legal document that many business owners overlook is the operating agreement. At Taylor, Minnette, Schneider & Clutter, we help LLC owners understand the importance of this document and ensure it meets their business needs.
Defining How Your LLC Operates
An operating agreement outlines the internal governance of an LLC, including ownership percentages, management structure, voting rights, and profit distribution. While Indiana does not always require LLCs to have a written operating agreement, having one is highly recommended. It provides clarity among members and serves as a legal safeguard in case of disputes.
Without an operating agreement, state default rules govern the LLC. These default rules may not align with the members’ intentions and can create conflicts or unintended consequences. A well-crafted operating agreement allows members to define their own rules, including how decisions are made, how new members are added, and what happens if a member wants to leave or sell their interest.
Protecting Your Business and Your Liability
Operating agreements also play a vital role in protecting limited liability status. Courts may scrutinize LLCs without clear agreements, increasing the risk that members could be held personally liable for business obligations. Additionally, having a comprehensive agreement can help with banking, attracting investors, and demonstrating professionalism to potential partners.
Beyond governance, an operating agreement can address contingencies such as the death, disability, or departure of a member. By proactively outlining procedures for these situations, the LLC can continue to operate smoothly without disruption.
Start with the Right Legal Foundation
At Taylor, Minnette, Schneider & Clutter, we work with LLC owners to draft operating agreements that reflect their goals, protect their interests, and reduce the risk of disputes. Proper legal planning at the outset can save time, money, and stress in the future.
Protect your business and clarify your LLC’s rules from the start. Contact our attorneys today to draft an operating agreement tailored to your needs.