Congratulations! You’ve come up with a brilliant business idea selling a much-needed product or service. You have partnered with a person or people you share a vision with who you know will help the business grow and you all agree creating an LLC is the smart way to go to protect your interests. You are ready to conduct business, make that money and learn and grow as entrepreneurs. Life is good!
Until it isn’t…..
Suddenly, your partner decides they don’t want to work in the same capacity they did in the beginning, or they start spending more money “for the business” without running it by you first for a consensus, or they start misappropriating or overextending the business funds, running meetings without you, or changing how business is done. There are a million things that aren’t going right, and you are overburdened and have little beyond a conversation or likely an argument with your partner to try to resolve these issues. This all could be avoided with a little foresight and planning and by having a skilled Georgia attorney draw up an Operating Agreement for your business.
The state of Georgia does not require an Operating Agreement for an LLC. However, it is highly recommended and a best business practice to clearly outline the roles of each owner and the governing rules of engagement for running your business. Only a qualified and highly experience attorney should draw up the operating agreement. This will ensure nothing is overlooked in the honeymoon phase of business partnership.
An operating agreement can include any parameter, rule, guideline or outline you want to set and have agreed to before entering a business partnership.
A few of the common items included are:
An often overlooked and critical element of protecting you as a business owner is having the foresight to put an Operating Agreement in place even as a sole entrepreneur and LLC owner. It is imperative you keep your personal affairs and business affairs separate and setting up an official Operating Agreement with an attorney allows you to protect your personal assets and shield you from any possible legal issues.
If a sole owner has no Operating Agreement, it can be argued in court, that you are not following all the tenants of true LLC and have bypassed this legal step. At this point a judge can rightfully have your personal assets included in any settlement. No one wants this as an outcome and an experienced business attorney can help.
When thinking in terms of a corporation, you would have needed to have an attorney draft a corporate binder, a stock ledger, bylaws, and possibly stock certificates to protect the entity and keep it separate from the individuals running it legally. The Operating Agreement serves in the same way for the LLC owner(s). For a quarter of the cost, you know have legal protection from any future business legal issues affecting your personal assets and holdings.
There is a lot to consider. A legally executed Operating Agreement is a critical component in the setup of your LLC. It will ensure you and your business partner(s) have a complete, written and legally binding understanding of how the business will run. Set your business up for success and remove the possibility for hard feelings and misunderstandings. Contact Sparks Law today for more information.