An operating agreement in United States of America is an official document that contains internal regulations and rules that would govern the operation of a Limited Liability Company (LLC). LLC is a flexible enterprise which constitute of elements for both corporate sectors and partnership. In the vast proportion of United State jurisdiction, this is a legal company which offers limited liability to its owners. Hence an operating agreement should have essential lineaments regarding in-house matters of a LLC that extends from how a new member would join the company to what remuneration would be offered to the officers. Even, it also elaborates the function of the employees that is desired to be performed.
After reciting all the important operation related content of LLC, the operating agreement has to be presented to its intended audience for approval. This is generally approved by the existing members of that particular LLC through organizational meetings. However, to impart an authentic look to the operating agreement the document has to be executed with utmost precision and touch of professionalism. To do that, certain factors have to be followed while drafting the document. These factors remain unaltered regardless of the kind of content that is being depicted in the operating agreement. They are, as enlisted:
- Initially, start the agreement with a brief statement that describes the kind of work performed by the particular LLC and responsibilities of the essential personnel.
- Secondly, the operating agreement should profusely emphasize on the objective or purpose of the agreement as well.
- Being narrative and concise is two of the most important formulae for drafting an effective operating agreement. This might detail all the necessary information pertaining to agreement in a chronological format so that it becomes easier for the concern parties to understand the document properly.
- For any operating agreement with whatever purpose, it is important to give a detailed overview about the existing members and their function in the company. This list also helps in stating the laws, terms and rights that are being designated to each person already working or yet to join. Such lineation essentially contributes on the smooth operation of Limited Liability Company.
- As this kind of operating agreement documents are important for the LLC(1); therefore, it should be so constructed that it can serve as a record for future reference.
- Finally, the document needed to be authorized by the law of the nation so that it could serve as a legal paperwork.