If you have decided to form your business as a limited liability company (LLC), you have chosen the most popular entity for American companies. The LLC offers protection for members that partnerships and sole proprietorships do not. It avoids double taxation because profits pass through to members who report them on their personal income tax returns.
Although you do not have to enter into a written operating agreement with other LLC members, forgoing this step can be a bad idea. An operating agreement regulates the company’s affairs, including how members relate and conduct business. Without a written agreement drafted by a skilled attorney, misunderstandings will likely arise. At Sparks Law, a South Carolina operating agreements lawyer is available to discuss your business needs and help tailor a document to fulfill them.
Historically, many business agreements were cemented with a handshake. However, memories fade over time and nobody remembers the past in the same way. Faulty memory is why written operating agreements are essential road maps for how the members agree to conduct their business. Some of the information members should include in an operating agreement includes:
The list is not exclusive. Additional provisions may include how new members become involved, tax structure, and terminations.
Business owners may be lulled into thinking verbal agreements are satisfactory, especially if the LLC is a family business. Do not make that mistake. Our experienced local attorneys could help put agreed-upon terms in an operating agreement to circumvent conflicts that can land everyone in court.
Without a contract, disputes could even lead to the dissolving of the business if members cannot resolve problems. The skilled South Carolina lawyers at Sparks Law could provide a comprehensive agreement to be used as a definitive guide.
State law under Section 33-44-103 of the South Carolina Code of Laws dictates how an LLC is run if there is no verbal or oral operating agreement, or if there is an oral agreement but the members are vague on what the terms actually are. However, business owners may not want state law to rule their decisions if they are contrary to the members’ intentions.
Without a written agreement, a rogue member could undermine a lucrative merger because the action will default to current South Carolina law. The well-practiced attorneys at our firm could circumvent potentially devastating problems by drafting a written operating agreement before issues arise.
Limited liability companies are popular because they benefit all members, even single members. They offer a favorable tax structure, relaxed state reporting duties, and a shield from company debts and lawsuits. A sole member can benefit from an operating agreement if the vision is to grow the business and admit new members.
Naturally, voting concerns will not arise with a sole member, but voting should be described in an agreement if a new member is accepted. In addition, procedures for admitting a new member and other covenants typical of an operating agreement could be addressed in advance. A South Carolina attorney could on drafting a single member LLC operating agreement.
Your business is important to you, and you should not cut corners when setting it up and running it. Although South Carolina does not require you to adopt an operating agreement, this document can be crucial to ensure the success of your company.
When members adopt this document, they sign on to principles that will guide the business and circumvent many future conflicts. Contact Sparks Law today to learn how one of our South Carolina operating agreements lawyers could benefit your limited liability company.