You must make many decisions when setting up your New York business. You want consumers to identify your product by your name and logo. You wish to market your exciting products and innovative management. However, before you get to this stage, you must register to do business with the state.
If you have chosen to form your business as a limited liability company (LLC), you will be operating under the most popular entity in America. The tax benefits, protection from liability, and less stringent reporting duties make the LLC a desirable choice. Your next step is to contact a New York operating agreements lawyer to help draft the necessary documents for your business’s success. At Sparks Law, our skilled attorneys can assist you at every step of the way.
All states require new limited liability company owners to file articles of organization, much like a corporation’s incorporation papers. Although most states do not require LLCs to adopt a written operating agreement, New York does, under the Consolidated Laws of New York Section 417.
Members can adopt the agreement up to 90 days after filing the articles of organization. If it is drafted before the company is formed, it does not become effective until the articles are filed. This critical document is like the bylaws of a corporation. A local attorney at our firm can discuss the information a business owner should include in an operating agreement.
Operating agreements spell out how a business will be managed, the tax choice between pass-through and corporate, and detailed information about members’ contributions. It should include the distribution of profits, members’ responsibilities, what happens if a member does not abide by prescribed duties, what happens if a member dies or wishes to sell a membership, and how to wind up the company. All members must sign and agree to the terms of the contract, which binds them to those terms.
Some of the most important information to include in an operating agreement is:
A written operating agreement is essential if problems arise down the road. When members disagree, they can land at an impasse or litigation that impacts the business. However, most disagreements can be mitigated if the company has an operating agreement, as the document should address a variety of conflicts that could pit members against each other. A New York lawyer at Sparks Law can help draft an operating agreement that encompasses the company’s vision and answers questions in advance.
Some members are cast as managers who actively run the company. The operating agreement can indemnify them from decisions that do not work out if they did not act in bad faith or intentionally profit from their decisions, according to New York law.
Members must agree and accept the capital contributions of all other members, and the value of the contributions should be memorialized in the operating agreement. Contributions can be money, property such as an office building, or services, such as accounting or legal. Contributions do not need to be equal. When members decide on the percentage each contribution represents, the percentage of ownership in the LLC is established.
It is more challenging to decide the contribution of new members after the LLC has been in business for a while and initial contributions have appreciated. An operating agreements attorney can explain the ramifications of taking on new members and help memorialize contributions in writing.
Although the operating agreement can be amended from time to time, all members must agree if any of them are adversely affected or obligated to make additional capital contributions. Additionally, members must be in agreement if the revision alters any distributions for tax purposes. A knowledgeable New York attorney can further explain the implications of amending an operating agreement.
Choosing a limited liability company as your business vehicle is an essential first step as an entrepreneur. However, there are legal documents that are also necessary for your company’s success.
A New York operating agreements lawyer can help draft and review the documents that give your company legal standing in the state. Contact Sparks Law today to schedule an appointment with an experienced legal advisor.
