A limited liability company (LLC) is a business structure in the United States that protects its owners from being personally liable for the company's debts or obligations. If you own a business and several assets, you may want to consider forming an LLC. Each state has different laws on creating an LLC. In North Carolina, you do not have to have an operating agreement submitted to the North Carolina secretary of state. However, it is still strongly recommended as it provides crucial information that may be helpful in times of disagreement regarding how to operate the LLC. Other key benefits to an operating agreement will be discussed further below.
An operating agreement is an important document that LLCs utilize because it provides information on the company’s financial and functional decisions. These include the rules, regulations, and provisions in your company. The operating agreement also helps to govern your company's internal operations in a way that aligns with the needs of the various business owners. After the members of the LLC sign this agreement, it is an official contract that binds the LLC members to its terms.
There are many reasons why an operating agreement can benefit a business, especially one just starting out. It may take additional time to draft it initially but can often prevent many conflicts and save you and LLC members time in the long run. Some of the key benefits of creating an operating agreement are listed below.
Operating agreements tend to be between five to twenty pages long. It outlines the functional and financial decisions for how to run your business and includes the provisions, rules, and regulations. This includes but is not limited to the following:
It’s a good idea to create your operating agreement before filing your Articles of Organization with North Carolina’s secretary of state. You can also wait until the formation of your LLC is complete. However, some banks require you to submit an operating agreement before opening a bank account with their financial institution.
Operating agreements are kept with the essential records of your business. You do not need to file it with North Carolina’s Secretary of State. Note that you should keep the operating agreement details confidential in your company.
There are several free templates for operating agreements that you can use when you begin drafting yours. You can find templates for both single and multi-member businesses. The general steps for making an operating agreement are shown below.
Once you have completed your operating agreement and the business members agree, each member should receive a copy of the operating agreement.
The operating agreement is not required in North Carolina but is strongly recommended. It can be a crucial document for outlining how your company operates. This can ensure that members are on the same page in times of conflict. In the case of a major event such as adding or losing a member, it is a great idea to review your operating agreement. It is also important to note that your operating agreement is a fluid document; you can update it even after it’s written as long as business members agree.
If you require additional assistance creating an operating agreement, it can be helpful to consult a business attorney for assistance.