Importance of an Operating Agreement – 3 Templates

Businesses would not survive without operations. This is what keeps the business going. However, like all aspects of business, operations are not exempted to sample agreements. Operating a business does not go as simply as it is. This is where an operating agreement comes in.

An operating agreement is a written document used by limited liability companies (LLC) to set rules and regulations on the operations of a company. The operating agreement also outlines the financial and functional aspects of the business. This document governs the internal operations of the business in a manner that serves the interests of the business owners. The LLC, a company which has a characteristic of both corporation and a partnership, signs this document.

Operating Agreement Template

Operating Agreement Template

Operating Agreement Sample

Operating Agreement Sample

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Sample LLC Operating Agreement

Sample LLC Operating Agreement

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Importance of an Operating Agreement

Every kind of agreement is important. It helps in ensuring that all functions will be carried out properly. The same goes for a printable operating agreement. It is important to have this kind of document so your business will not be governed by the default state rules which may not be beneficial for it. Even sole owners of LLC still need an operating agreement so their limited liability status will be protected. Furthermore, having a comprehensive operating agreement will help in tailoring the needs of your business and protect your personal finances as well.

Here are a number of reasons why an operating agreement is important.

1. Rules for managing the business

An operating agreement lays out the rules and regulations for managing the business. With this, there will be a set of rules as to how the business will be handled and what are the possible sanctions if ever the rules are violated. The agreement also states the policies that should be agreed on by both parties. You may also like simple operating agreement templates.

2. Profits and losses sharing

The operating agreement states the sharing of profits and losses by both parties. Whatever the profit or loss may be, there should be an equal split. Sometimes, what they get depends on their agreement for one often gets less than the other. You may also see operating agreement templates.

3. Selling, closing and leaving the business

One part of an operating agreement covers this matter. In the event, the business gets sold to others, gets closed due to unforeseen circumstances, or if one partner leaves the business, the rights of both parties should still be protected. Compensation and other financial matters will come in, as the money earned while the business was at its peak shall be divided. You may also see general partnership agreements.

4. Ownership percentage

The agreement should also state how much one party owns in the business. This is about the shares in stocks. Be clear in determining the ownership and the other matters that come along with it. This is really important especially if a lawsuit arises when things go wrong. You may also see business agreement templates.

5. The business’ rights and responsibilities

Every business has its rights and responsibilities by law. In the operating agreement, state how the business should handle both. The responsibility of a business should be balancing profit-making activities that will benefit society as well, or what they call social responsibility. The rights a business has included a supply of goods from suppliers and accuracy in the presentation of the supplies to be purchased. You may also see sample consulting agreement templates.

The contents of operating agreements are different, depending on the kind of business it operates. Whatever the business may be, this document will prevent the business from getting into a lawsuit and have its rights protected under the law. You may also see partnership agreement templates.

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