What to Include in Your Operating Agreement (2024)
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- Опубликовано: 31 июл 2024
- As business attorney with over 25 years of experience, I wanted to make a video explaining what is an Operating Agreement and what to include in an Operating Agreement for an LLC.
This video covers:
First, what is an Operating Agreement for LLC?
Second, why you need an Operating Agreement.
Third, what to include in Operating Agreement for LLC.
The Operating Agreement for an LLC is the single most important document for your Limited Liability Company (LLC), and I tell you exactly what to include in the LLC Operating Agreement.
The Operating Agreement for an LLC is essential for both proper LLC governance and for protecting your personal assets from liability related to the LLC. It also protects your LLC from the liability of its members. It is required if you want to maximize asset protection.
I take you step-by-step through each important provision in an LLC Operating Agreement and explain each one in detail. I even provide some sample provisions for you to draft. By the end of the video, the important question of "what should I include in my LLC Operating Agreement" will be answered.
If you want a very high quality attorney-drafted Operating Agreement (and/or other contracts and forms), note that a related company of mine is offering them at a fraction of the price you'd pay an attorney. Go here to learn more (and receive a 10% discount): www.attorneydrafted.com.
If you want a free template Operating Agreement, I have a video walkthrough on how to create an Operating Agreement for free here: • Operating Agreement fo... .
If you need a virtual office address so you can have a professional address outside your home, this company is in almost all states (and some other countries as well): bit.ly/AllianceVirtualOffices (affiliate)
If you missed my video which covers all steps you should take after forming your LLC, go here:
• What To Do After Formi...
If you have not yet set up an LLC, the link to my video on "How to Form an LLC (Limited Liability Company)" is:
• How to Create an LLC I...
If you are not yet sure what entity is best for you, here is the link to my video on how to choose the best entity for your business:
• LLC vs S-Corp vs C-Cor...
00:00 Intro: What Should I Include in an Operating Agreement for LLC
00:36 What is an Operating Agreement for LLC?
00:50 Why Have an Operating Agreement for LLC?
01:49 What Should be Included in Operating Agreement for LLC
Thank you!
Best regards,
Chris Jackson
@cjlawvideos
//BIO//
Hi, I'm Chris Jackson. I have over 25 years of experience as a business attorney. I'm also an entrepreneur who has owned, managed and sold at a significant profit multiple franchise coffee houses. In addition, I have finance and operational experience as a Chief Operating Officer (COO) of a large company.
//DISCLAIMER//
Disclaimer: Note that nothing in this video is intended to create an attorney-client relationship. This video and my channel are for general information and entertainment purposes only and should not be construed or relied upon as legal or tax advice (generally or specifically). You should not act or rely on any of the information contained herein without seeking professional legal advice.
#limitedliabilitycompany #llc #llc2023 #assetprotection
I really like your videos and how straight to the point you are without all of the fluff. You have really helped me and I just want to say thank you.
Thank you Kathleen! That's very nice of you to say. Let me know if you ever have any questions! Best regards, Chris
I hope you liked this video on what to include in your Operating Agreement. Thank you for watching!
Please "Like" and "Subscribe." For the additional steps on what to do after forming your LLC, go here: ruclips.net/video/QvFuTI3CdbQ/видео.html
Thank you!
Thank you so much!
You are welcome, and thanks for watching! Best regards, Chris
Thank you so much your a blessing to me and others this information is actually what i needed you broke everything down and it was easy to understand
Thank you for your kind words! I'm glad you found it helpful. Comments like this motivate me to keep producing videos, thanks! Best regards, Chris
Thank you Chris for sharing, great information here.
Thank you for your kind words. I'm glad you liked it!
Thank you so much Chris
You are welcome, and I'm glad it was helpful! Best regards, Chris
Thankyou. This is very comprehensive and well explained
Thank you so much for your comment. It's always good to hear that. If you have any questions, please let me know. Thanks!
Thanksssss !!
You're welcome ... glad it was helpful! Best regards, Chris
Thank you for explaining these LLC points!
You are welcome, and thank you for your comment!
❤
Glad you liked it, thanks!
You mention capital contributions should match member ownership percentage. Is that mandatory? In my case, my brother and I would like to start an LLC as 50/50 but for practical reasons the money is now in his account. Thank you very much and congratulations on your channel, it's excellent information you are making available !
Hi Horacio. Thank you for your kind words and for your question. I can't give you specific legal advice without being hired, but here are some general principles to consider.
I believe you want to know whether your brother can transfer 100% of the initial capital contribution into the LLC bank account, but that you will own the LLC 50/50? There are a couple of ways to accomplish this. First, you can for example put in the Operating Agreement that he contributed $500 in cash and you contributed $500 worth of services (sweat equity). Or, you can have a side-agreement with your brother that he will put in the cash for both of you, and you will owe him half of the cash through a separate promissory note.
Note that the initial capital contribution does not need to be a lot of money. If you want to have just $500 in cash from him and $500 in services from you (or $1,000/$1,000 or higher), and he needs to later put in more of his cash for operations, you can always characterize anything he puts into the LLC above the initial capital contribution as a "member loan" to the LLC which the LLC has to pay back to your brother. This way your equity position stays at 50/50 without having to put in extra cash or meet any "capital calls" for members to put in more cash.
There are other options, but those are probably the easiest. I hope this helps, but please let me know if you have other questions.
Best regards,
Chris
@cjlawvideos Chris, I really liked your answer. Now it's much clear to us how we need to proceed. Thank you very much!
@@horacioricardodrut6645 You are welcome, and best of luck to you and your brother in your business! Best regards, Chris
Thank you Chris, super helpful information. Do you recommend a Wyoming LLC for real estate protection?
Hi Stephanie. Thank you for your kind words, they are much appreciated.
It's funny you should ask that question, as one of my upcoming videos will be why I recommend a Wyoming LLC. While I cannot give you specific advice unless I'm your attorney, generally speaking I recommend Wyoming LLCs for many reasons.
Relatively speaking, Wyoming law is very protective of members from the liability of the LLC by making it difficult for plaintiffs suing the LLC to "pierce the corporate veil" and subject the assets of the member to risk. This is true of single-member LLCs as well, the veils of which are easier to pierce in many states.
Wyoming is business friendly, zero tax, low fees and offers a very high level of protection of one's personal assets from the liability of the LLC. I'm a fan. Note that your WY LLC will have to qualify to do business in the states in which you own property.
Good luck, and let me know if you have any other questions.
Hi Chris good video. What is the difference between an operating agreement and a indemnification agreement. In my last LLC I don’t believe I had an operating agreement which it was set up an attorney. I did have an indemnification agreement.
Hi: Thank you for your kind words and for your question.
The Operating Agreement is the main document that controls how the LLC is managed, how decisions are made, what percentage ownership applies to each member, how profits are distributed, how new members can join, etc. Having an Operating Agreement, and abiding by it, are important to establish that the LLC is a separate entity from the owner/member, and as such, better protects the members' personal assets from the liabilities of the LLC.
Regarding an indemnification agreement, most Operating Agreements will include an indemnification clause which protects you, the member, along with the manager(s), employees, etc. from actions taken on behalf of the LLC that were taken in good faith.
I hope that helps, but let me know if you have any other questions. Thanks!
And, if you are in CA and need an attorney to help with any business-related matter, feel free to reach out to me at www.chrisjacksonlaw.com
Best regards,
Chris
Chris, I just heard of a way that some folks are using to get out of their leases by using the fact that the landlord did not give them information sheets and have them sign a form about having 3 days to legally get out of a lease that they signed (contract recission). Do you know where I could find the fact sheets and a sample of a form stating that after signing the lease that the propspective tenants have the right within 3 days to cancel the contract? Thanks for any help you can give me.
Hi. Generally tenants do not have the right to rescind a lease once it is signed. There may be states where this is allowed, but this is not permitted in CA. Perhaps I'm misunderstanding your question, so please let me know. Thanks! Best regards, Chris
Chris, great video! I'm in the process of using LegalZoom for my operating agreement form: 1.are they good for this process?
2. On the LegalZoom operating agreement form, they are asking me about units vs percentage? I'm already LLC incorporated, working in the business as a single member. Which is the best way go to between the two (units vs percentage) for future reference?
Hi Chris.
Thank you for your kind words.
Note that, generally speaking, I use percentages rather than units. Units may be more appropriate for an LLC which intends to raise money from multiple sources. I would just put that you own 100% of the LLC as a single-member. I'm not familiar with the quality of Legal Zoom's Operating Agreement, but if you want a free one to compare it to, I have a video on how to create your own here: ruclips.net/video/-7NH95aM2YQ/видео.html.
Also, note that a related company of mine is about to launch selling attorney-quality operating agreements at a fraction of what you'd pay an attorney. To sign up for the pre-launch and receive a discount, here is the link: www.attorneydrafted.com.
Thank you, and best of luck to you and your LLC. Best regards, Chris
Can you make a video to show how to transfer an LLC into a holding company etc
Thanks for your suggestion, and yes I intend to do that. I get that question a lot, so it's on my list. Thanks! If you are interested, please note that a related company of mine will be offering a holding company package, which includes structure, steps and generic documents (e.g., Contribution Agreement template), for purchase at: www.attorneydrafted.com. Best regards, Chris
Should I set up another company as a holding company? I only have an LLC that’s in my name and everything
Does this operating agreement get filed somewhere with the state the LLC is in? I am giving my registered agent a copy, but other than that, I don't know where else it goes. Loved the video so clear and so concise. I really appreciate your willingness to share your expertise.
Hi Linda. Thank you for the kind words. No, your LLC Operating Agreement is an internal document and does not need to be filed (or even given to the registered agent). Some banks will request a copy when you open account, but usually they just need your Articles of Organization and EIN. Just use your Operating Agreement to govern how decisions are made, how the LLC operates, etc. Thank you.
Best regards, Chris
Is there a video on the Articles of Organization or are they one and the same with the Operating Agreement? Thanks for geting back to me. I appreciate your help!@@cjlawvideos
@@lindabarnes1585 Hi Linda. You're welcome, thanks. The Articles of Organization is what gets filed in the state to form the LLC. Have you formed your LLC yet? If not, I have some videos on how to form your LLC on your own. Let me know, thanks! Best regards, Chris
My LLC has been formed. I remember filling out an application online and being asked about something I didn't understand, so I left it blank. I will contact the state where I formed the LLC and ask if I can amend the application. Thanks for getting back to me so I can make this right.
@@cjlawvideos
@@lindabarnes1585 Ok, thanks. Hope all goes well, and let me know if you have other questions. Thanks! Best regards, Chris
Hello Chris, do you provide service for helping a new small business complete, LLC / S-Corp , Operating Agreement for the state of Whyoming?
Hi Adriana. Yes, I can help. You can reach me through my website (www.chrisjacksonlaw.com) or by email at chris@chrisjacksonlaw.com.
Best regards,
Chris
Great video! Can a LLC be 100% owned by a Revocable Living Trust as a sole member, where husband and wife (in a Community Property State) are the trustees? And also, in this case, would the LLC be considered a single or multi-member LLC?
Hi:
Thank you for your kind words (and for watching my video).
I can't give legal advice without being retained, but here is some general information.
If a trust is the sole member of the LLC, that LLC would be considered a single-member LLC. If you and your wife are in a community property state, you could each own part of the LLC as 50/50 members, but for tax purposes it would generally be considered a single-member LLC.
I generally recommend both spouses be considered members and/or managers (I like Manager-Managed LLCs) just in case something happens to one spouse.
Hope that helps! Best regards, Chris
@@cjlawvideos Thank you for your prompt response!
@@Frankiep72 You're welcome, and best of luck to you, your business and your LLC! Best regards, Chris
I do have a question, should the personal address be included in the operating agreement? Or should the business address only, under allocation and of profit/loss? Thank you!
Hi. Thanks for watching the video and for your question.
Note that the Operating Agreement is an internal document, so it won't be disclosed to your State, so no worries.
If you have a business address, you can use that as the address for the business in the Operating Agreement if you like. For the member address, if you are going to include that in the Operating Agreement you can use the personal addresses of each Member. With that said, I generally recommend that you use a business address on any forms that are filed with your State (e.g., Articles of Organization or Annual Repots).
Also note that I have a video on how to create a Free Operating Agreement here: ruclips.net/video/-7NH95aM2YQ/видео.html
Hope this helps! Best regards, Chris
@@cjlawvideos You rock!!! Thank you so much!!
@@lionlove35 Happy to help, and best of luck! Best regards, Chris
How would I go about being considered an S Corp as a single member LLC offering cleaning + property maintenance services?
Nevermind, I answered my own question!
Sounds like you already have the answer, but to elect S Corp tax status you should file Form 2553 with the IRS within 75 days of forming your LLC or within the first 75 days of any tax year. Best of luck to you and your LLC... let me know if you have other questions. Best regards, Chris
@@cjlawvideos I'm really sorry to have to go back on this but I have a few more questions:
If I elect to have my (currently single-member) LLC elected as an S Corp, would I have to undergo all of the intricacies which a true S Corp is required to have? (besides having
Should I sign any documents as manager or member ?
Hi Pamela. Thank you for watching my video and for your question. If you have chosen a Manager-Managed LLC, then the Manager signs all documents on behalf of the LLC (other than the Operating Agreement, which should be signed by all Members - but you can add the Manager's signature if you like). I hope that helps ... if not, please let me know. Thank you. Best regards, Chris
How about credit agreements like cards and loans and the personal liability for those debts.@@cjlawvideos
I would like to create an officer position like the president in the operating agreement. So, my Wyoming LLC would be the owner of the State LLC and I would appear as an officer to sign all documents but keep anonymity as the owner of the Wyoming LLC. The officer can not be liable for both LLC.
This is only for entertainment purpose , not legal advice.
@@nouche-30064 Hi. Ok, you can appoint yourself as an officer for the LLC. You should just add that you are, for example, the Manager and also the CEO of the LLC. However, note that the Manager is technically an officer if you don't want to add the CEO title. Hope that helps! Best regards, Chris
@@cjlawvideos Thank you Mr. Chris for your very helpful videos and for taking the time to answer.
I am still learning but I know that before I fill for my WY LLC, I should need my draft to be reviewed. Is it possible to hire you for that and later for the State LLC that will be own by the WY LLC? I wouldn't like to learn from your videos and not be able to compensate your help and work.
Great video! Just reached out via your website and LinkedIn. Would love to discuss some things about our film production company with you!
Nice communicating with you via email. Thanks! Best regards, Chris
Do you own IncFile?
Ha... I wish! They seem to be doing well with their business model.
please help us and fix your phone so we can keep in touch
Hi. Thanks for reaching out to me. I sent you an email earlier, thanks. Best regards, Chris
Hi jackson brother your doing a good job for helping us and we would like to work with you but your phone number is not working help us
Hi. Thanks for reaching out to me. I sent you an email earlier, thanks. Best regards, Chris