Utah Business Operating Agreements
What Is an Operating Agreement?
An operating agreement is a legally binding document that is used by limited liability companies (LLCs) and defines how the company is to be run. It outlines the governing structure of the company, the rights, and responsibilities of each owner, and describes how disputes are resolved. Usually, a typical operating agreement includes the following sections: organization of the company, changes in membership, distributions, capital contributions of each member, and dissolution.
Who Is an Operating Agreement For?
If your business is a limited liability company (LLC), it is essential to have an operating agreement. Here are the main reasons why you should consider creating an operating agreement as a business owner:
- To protect the limited liability status of your business.
- Investors and banks may require business owners to have an operating agreement as proof of their ownership.
- It allows you to customize how the company operates.
- An operating agreement will identify how important decisions are made.
What Does an Operating Agreement Cover?
An operating agreement covers different things and aspects depending on the specific needs of the business and specific circumstances. Most operating agreements should include the following:
- Percentage of ownership of each member. The owners of a business make contributions of cash, services, or property to get a company up and running. A percentage of ownership of each member is usually proportionate to the contribution they made, and it is very important to define ownership percentages in an operating agreement.
- Distributive shares. An operating agreement should also define the sharing of profits and losses of each member. For example, if a member owns 10% of a business, he or she also receives 10% of profits and losses.
- Voting rights and regulations. An operating agreement should also cover how voting on important decisions is handled. It should define whether all members can vote, or the voting power will depend on a percentage of ownership.
- Ownership transitions. Members may pass away, retire, or sell their interest in the business. How will these situations be handled? An operating agreement should describe in detail what will happen if one of the members decides to leave.
How Can an Attorney Help?
In general, you do not need any help to create an operating agreement. You can easily find operating agreements templates online and use them for creating your own. However, if you have never had this type of agreement before, using one of the general templates can be dangerous. First, most of the general templates are not detailed enough, which makes them useless. Also, if you are using an operating agreement template downloaded from the internet, you deprive yourself of legal advice and experience.
Unless you have had an operating agreement before, you will not know if it includes all the necessary and important information. For this reason, consultation with a business attorney can be quite helpful. Business attorneys know how to draft operating agreements and what to include in them to protect businesses and business owners. Moreover, an attorney can help you create a specific agreement tailored to the unique needs of your business.
Howard Lewis & Petersen – Utah Business Agreement Attorneys in Provo, UT
Are you starting your LLC in Provo, UT, and are thinking of creating an operating agreement that will outline the rules and regulations of your business? Then, you help an experienced business lawyer in Provo UT. At Howard Lewis & Petersen, Provo business lawyers have the expertise, experience, and knowledge to handle all types of problems in various practice areas. Our Provo business attorneys specialize in drafting operating agreements and work with a wide range of businesses. Therefore, if you need a Utah business operating agreement for your business, Howard Lewis & Petersen is the right company to contact.
If you are ready to schedule the first consultation with one of our Provo business litigation attorneys, feel free to visit our website for more information or give us a call.
