By Jonathan Feniak, Esq., MBA
An operating agreement is a contract that sets the obligations, financial rights, and duties for the managers and the members of an LLC. Every state requires articles of organization in order for your business entity to be recognized. An operating agreement, on the other hand, is only a requirement in some states, andit is not in Colorado. Is it still a good idea to get one?
It's up to you. If you are the single member of an LLC it could be needed if you may take on partners in the future; for multi-member or manager managed LLCs it is really important to have an operating agreement.
When you hire us to form your LLC, we provide an operating agreement to you. For simple changes like adding or removing a member or manager, in most cases you can safely modify it yourself. However, if you need to change the rights, duties, and obligations of managers, you should enlist the help of an experienced business attorney. Find out more about forming a Colorado LLC, registered a Colorado business and our registered agent services.
Because of its intention as a contract to yourself most of the people think this is not necessary just because it could be disregarded or amended when needed. We think that it could be useful in some cases, and we think that the main are: 1- For the transfer of membership interest according to your will and the "transfer on death" provision. Most LLC's members would like their relatives to inherit the company or a part of it when they die, but not all owners have a plan to transfer their ownership. With this provision you ensure the transfer of the company to your relatives. 2- It is required by some banks and financial institutions if you want to open an account.Order Now
Having an operating agreement when there is more than one member of an LLC is not required but probably should be! We suggest all members sign and keep a copy for safekeeping. Having a signed operating agreement will be useful when:
Operating agreements are really important in LLCs to create an atmosphere in which all members and managers understand their rights, duties, and obligations. We recommend you draft and sign an operating agreement in the first 30 days of your company because this process is rarely completed after this period. If you are interested in drafting a custom operating agreement for your company, you can contact our attorney through the contact link on our website. If you’re planning on opening an LLC, we have many helpful resources on our blog including information about articles of organization, EINs, Colorado business licenses, and sole-proprietorships.Order Now