4 Reasons Why You Simply Must Have An Operating Agreement

Let us state this right up front: It is not mandatory that you have an operating agreement for your Limited Liability Company or Limited Liability Partnership in Florida. However, if you want to get the best out of your business and provide the best platform for it to succeed, you really need to consider putting an operating agreement in place.

What Is An Operating Agreement?

Just like a country needs its constitution, every business needs a document that sets out the respective rights, duties, benefits and liabilities of its owners. An operating agreements does just this.

It is drafted at the foundation of the business and helps ensure that the foundation is strong. It does not matter what kind of business model you have, your operating agreement helps ensure that your model is clear and reflects your company’s unique goals and needs.

Why Is An Operating Agreement Necessary?

Apart from the fact that an operating agreement is necessary to ensure that every founding member knows exactly where they stand, you should have an operating agreement for these four basic reasons:

Protection From Liability

Your operating agreement spells out exactly what kind of business model you are running. In most cases, it is not enough to simply state that your business model is an LLC or LLP and file as such.

If your operating model does not sufficiently show that you are operating as an LLC, a court can go after the personal assets of members to fulfil the company’s debts. The best way to show this clearly is through an operating agreement.

Address your peculiar needs

Every business has unique needs and goals. There is a certain way you want your business to operate and the best way to implement this is through your operating agreement.

If you do not outline your model exactly, it is likely that general provisions of law will be applied to your company and this is something that can work against your needs.

Outline Roles

A business works best when everyone knows what they are expected to be doing and focus on doing just that. This way, no effort goes to waste and unnecessary friction is avoided. The operating agreement spells this out in clear terms so no one can claim a right to benefits or rewards they are not entitled to.

Manage Disputes

Disputes are a fact of life, even among multi-million-dollar business partners. You can write dispute resolution mechanisms into your operating agreement to ensure that disputes are well managed before escalating.

This obviously helps business productivity and outlook. You can also provide for how the company can come to an end or buying out partners.

Let Us Help you

We are sure you already have a sense of how important operating agreements are. You need to have the best lawyers work on your agreement so it is effective and clear.

At Jurado & Farshchian, P.L., our lawyers have extensive experience with creating corporate documents like operating agreements for clients operating several business models.