Atlanta Operating Agreement Attorney
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 attorney 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.
What Is an Operating Agreement For LLCs?
A limited liability company (LLC) operating agreement is a legal document that outlines the ownership and management structure of the LLC. It is a contract between the members of the LLC that establishes the rules and procedures for the operation of the business.
Components of an Operating Agreement
The specific components of an operating agreement vary widely depending on the needs of the LLC, but generally include the following:
- Identification of the LLC: The operating agreement should clearly identify the name and address of the LLC, as well as the date it was formed.
- Business Purpose: The operating agreement should describe the business purpose of the LLC and the activities it will engage in.
- Members: The operating agreement should identify the members of the LLC, their ownership percentages, and their capital contributions.
- Management Structure: The operating agreement should outline how the LLC will be managed, including whether it will be managed by its members or by appointed managers.
- Voting Rights: The operating agreement should describe the voting rights of the members, including how decisions will be made and what percentage of votes is needed to approve a decision.
- Profits and Losses: The operating agreement should detail how profits and losses will be allocated among the members, including any special allocations or distributions.
- Transfer of Ownership: The operating agreement should outline the process for transferring ownership of the LLC, including any restrictions on transferability.
- Dissolution: The operating agreement should describe the process for dissolving the LLC and distributing its assets.
- Indemnification: The operating agreement should provide for the indemnification of the members, officers, and managers against certain liabilities.
- Amendment: The operating agreement should specify how it can be amended or modified and what procedures must be followed.
The Benefits of Having a Written Agreement
There are a variety of benefits that explain why an operating agreement is essential for an LLC. Some of which include:
- Provides Clarity: An operating agreement provides clarity on the roles and responsibilities of the LLC’s owners or members, and how the company will be managed. This can help to prevent misunderstandings and disputes between members in the future.
- Customizable: An operating agreement is customizable, which means that it can be tailored to the specific needs and goals of the LLC. This allows the owners to structure the company in a way that best suits their business objectives.
- Protects Members: An operating agreement can also help to protect the interests of the LLC’s members by outlining the process for admitting new members, transferring ownership interests, and resolving disputes.
- Enhances Credibility: Having an operating agreement in place can enhance the credibility of the LLC in the eyes of lenders, investors, and potential business partners. It demonstrates that the company is a well-structured and organized business entity.
What Happens if There Is No Written Agreement?
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 operating agreement attorney at Sparks Law who can draft a well-tailored operating agreement for your LLC.
Operating Agreements Suitable for One-Member LLCs in Atlanta
Even though a single-member LLC is owned and operated by a single individual, it is still a separate legal entity and will benefit from having a written operating agreement. Here are some reasons why a 1-member-owned LLC may still need a written operating agreement:
- Clarify Ownership and Management: A written operating agreement acts as a sort of “wall” between the owner and the LLC itself—safeguarding the owner’s personal assets. It can help clarify the ownership and management structure of the LLC, which can be important if the LLC owner ever wants to bring on additional members or sell the LLC.
- Personal Asset Protection: A written operating agreement can help demonstrate that the LLC is a separate legal entity from the owner and can help protect the owner’s assets in the event of a lawsuit or other legal action.
- Dispute Resolution: A written operating agreement can help prevent disputes from arising between the LLC owner and any other parties involved in the LLC, such as employees or vendors.
- Bank Requirements: Banks often require a written operating agreement before opening a business account or granting a loan to the LLC.
In short, having a written operating agreement can help provide a framework for the operation of the LLC and can help protect the owner’s interests. While a 1-member-owned LLC may be simpler than an LLC with multiple members, it is still a good idea to have a written operating agreement in place.
The Importance of Working with an Attorney to Draft an Operating Agreement
Creating an operating agreement with the help of an attorney can help ensure that your LLC is structured in a way that promotes success and protects the interests of its members. An Atlanta operating agreement attorney can help you create a legally compliant agreement that covers all relevant issues and can help prevent conflicts and disputes from arising in the future.
Contact Our Atlanta Operating Agreement Attorneys
At Sparks Law, we have a wealth of experience and knowledge in helping small and medium-sized businesses in Atlanta navigate the world of Operating Agreements. Our team of Atlanta Operating Agreement attorneys understands the unique challenges and opportunities facing businesses in this city and can provide tailored agreements to help your business thrive. Contact our team to learn more and get started.