Operating Agreements generally address:
- the members' percentage interests in the LLC
- the members' rights and responsibilities
- the members' voting powers
- how profits and losses will be allocated
- how the LLC will be managed
- rules for holding meetings and taking votes
- buyout, or buy-sell provisions which determine what happens when a member wants to sell his or her interest, dies, or becomes disabled
In the absence of an Operating Agreement, the LLC will be governed by and have to adhere to the default rules developed by the State. Operating Agreements are not published and therefore, not public record. Once established, they can be modified by the members following the terms set forth in the original agreement.
Arizona State law does not require an Operating Agreement. For LLCs with multiple members an Operating Agreement defines how the company operates. With multiple members comes multiple personalities and multiple chances for misunderstanding. All of which can be alleviated through a well-written Operating Agreement.
However, as a single owner LLC or PLLC you might do well to check with your tax professional to verify the benefit vs. lack thereof for your own particular circumstance. In single member LLCs, an Operating Agreement defines the structure that the member has chosen for the company. This can be helpful in court to prove that the LLC structure is separate from that of the individual owner. The Operating Agreement also provides documentation that the owner of the LLC is, indeed, separate from the entity itself.
Because the Operating Agreement becomes pertinent after the creation of the LLC/PLLC, you have time to investigate this while your LLC/PLLC is being formed.
How do you draft an operating agreement? Since an Operating Agreement is basically an agreement between all of the members, it can be as formal or as casual as the comfort level of those signing it. There are a number of resources online. Realtors who, by their profession, are comfortable reading contracts and drafting agreements might find an online template to be sufficient to get their Operating Agreement started. As document filers, Reliable LLC Filings does not get involved in drafting Operating Agreements.
Out of an abundance of caution, you can hire an attorney to either review an operating agreement you draft or to help you create a custom one for your situation. The choice is up to you.
