When filing initial documents to form a limited liability company (LLC), Georgia does not require owners to submit an operating agreement. However, putting an operating agreement in place can be a beneficial move for LLC members.
If you are considering what documents to file for your LLC, work with an Atlanta operating agreements lawyer at Sparks Law on drafting terms that fit your circumstances. Our experienced attorneys can help structure an agreement that prevents future misunderstandings about your business’s management, finances, and actions.
When forming a business, owners may choose to charter an LLC because it offers advantages of both corporations and partnerships. For example, LLCs provide a choice between pass-through taxation or traditional corporate tax structure. Owners are also subject to limited liability, and an LLC is less formal to operate than a corporation.
An operating agreement for an LLC is basically the business’s rule book. This agreement can serve as the definitive source if misunderstandings arise, and should address issues like:
The above list is not all-inclusive. Terms could also include if, when, and how new members can buy in and how managing members should be terminated, as well as the business mission statement. A knowledgeable attorney at our Atlanta office can go over all the available options to determine what needs to be addressed in your operating agreement.
It may be tempting in the early stages of a business for owners to verbally agree on how to run it and skip the written agreement. Still, even among family business partners, arguments will inevitably arise and could easily lead to litigation or the business’s dissolution. Consulting an Atlanta operating agreements lawyer can help prevent these common pitfalls and protect the future of your LLC.
In the absence of a written operating agreement, decisions by LLC members could be overridden by Georgia law. For example, members might intend for a majority (but less than total consensus) to decide on terms for a merger or business combination, with no dissenter’s rights available. If an operating agreement establishes this, a member who disagrees with the terms of a merger must go along with it. However, if there is no operating agreement, Georgia Code Section 14-11-1002 allows dissenting members to have their membership interest bought out at a fair price.
Another example concerns the allocation of profits. Even if some initial capital contributions are more than that of other members, Georgia law requires equal profit allocation among all members if there is no operating agreement. This rule applies for tax purposes, even if the profits are not distributed. To better understand these potential issues and learn how to avoid them, work with a skilled Atlanta attorney at Sparks Law who can draft a well-tailored operating agreement for your LLC.
Sometimes, sole owners choose an LLC for some of the same reasons multiple owners would. This business structure offers an owner tax benefits and limited liability that a sole proprietorship does not have, as well as the ability to allocate certain powers to themselves under Georgia law. This can be possible through an effective operating agreement drafted with nearby legal assistance.
As the business grows, the operating agreement could also allow for the addition of new members. For sole owners of LLCs, these documents offer the legal protection of having it all in writing while allowing the business to remain flexible.
If you are starting a business and have chosen an LLC format, congratulations! This structure has many of the benefits of a corporation with a less complicated operating style.
Now that you are filing your initial documents, consider putting an operating agreement in place to ensure that your business operates the way you intend it to. At Sparks Law, one of our Atlanta operating agreements lawyers can help you avoid future problems and misunderstandings before they even arise. Call our office today to get started on the path to success.