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What is an LLC operating agreement?

The business that you start in Michigan can take a variety of forms. You can choose between a sole proprietorship, LLC, and several types of corporations. It will be up to you and your partners to decide the ultimate form that your new venture will take. If you choose an LLC, you will need an operating agreement.

The terms of an LLC operating agreement

The general foundation of U.S. business law begins with the form that you choose for your new company. From there, the most important building block will be the operating agreement with which you regulate your business. This is an agreement that needs to be worked out in advance so as to avoid future financial and legal issues.

An operating agreement will be especially useful if you form an LLC. This is the document that lays out the finances and operations policies. An operating agreement should include all of the basic provisions, rules, and regulations. This agreement is the guiding light that the business will follow.

An operating agreement should always be binding

After you decide on the form of your business, you should sign a contract that outlines your operating agreement. This will be an official document that binds all of the signers to the terms that have been outlined within it. Any changes that are to be made can only occur when all or a majority of the parties agree in advance to do so.

Even if you have already come to a series of verbal agreements, these should still be ratified via an official document. You can’t take a dispute over a handshake deal to court. The more concrete evidence you have of an official agreement being violated in some way, the stronger your case will be.