Operating Agreement necessary?

7 Replies

Hello BP! My husband and I are filing for our llc in a few days and the cost of doing an operating agreement is another $200. We are on a tight budget already and I don't know if this is necessary. To my understanding, if we don't have one, then the "general rules" for Michigan llc's will apply, but I'm not seeing what's wrong with that right now. Can we file this later? Is there something else I should be considering. I know anything can happen, but I think I'm ok with splitting this business 50/50 as the default rules state.

I asked our attorney to change our operating agreement once and he said it was far less expensive to just open a new LLC.

But, are you sure you need an LLC? I see lots of people forming LLCs that probably don't need to. Also, if they are formed incorrectly and not maintained properly, they may not provide any protection.

@Greg Scott Yes we want to have one, and being sure its done right is the reason we are going to a real estate attorney to do it instead of the the quick routes of doing it online and such. What situations are you referring to where it wouldn't protect us? And why did you decide against the operating agreement?

@Maria Taylor The operating agreement is a private document that is used when a transaction is done. A couple of examples of the transaction when it is needed: Opening a Bank Account, buy-sell a real estate property...  

Operating Agreement can be simple or complex; depending on how many people are owner, agents, managers etc for the entity. You can create this document with people who are knowledgeable and expertize.

Disclaimer: This is for information and entertainment purposes only; I am not giving any legal advice.

Hi Maria!! I went through a similar situation on one of my joint ventures.. let me send you a direct message

You can risk it and move forward without one, but understand if you are sued, the LLC will probably be ignored in court because you skipped it.

I would absolutely suggest you move forward with an operating agreement. It covers a lot of ground rules for the LLC and mitigates many risks. It is far more than just stating the ownership percentages and protecting you from lawsuits. Good operating agreements can cost thousands if done correctly by a reputable attorney. I would encourage you to have your attorney tailor it to your unique needs and circumstances. It can cover potential future events; however improbable they may seem today. If you have a good attorney then $200 seems like a bargain to me.

Disclaimer: The information provided by me is not intended to constitute legal advice; instead, all information is for general information purposes only.  I am not an attorney.  Readers should contact their attorney to obtain advice with respect to any particular legal matter.