What is an Operating Agreement and Do I Need One?

When it comes to structuring your business, there are a variety of legal tools available to help you meet your goals. One of the most important is an operating agreement, a document that organizes a business and details rules, rights and responsibilities for members. Read on to learn if you should create one for your business. 

Is an operating agreement required?

In Texas, businesses are not required to have an operating agreement, but it’s usually a good idea to have one. Operating agreements are especially useful if you are going into business with other people, but there are also benefits of having one even as a single-member LLC. 

What are the benefits?

An operating agreement is a governing document for LLCs that details the duties of managers and members as well as other important information about the company. 

Operating agreements are especially valuable for business owners who find themselves in court down the road; an official document signed by all members of your company will help the judge determine who is entitled to what, and how much. 

With an operating agreement, owners can set rules governing the following aspects of their business, including:

• Member roles and responsibilities

• Ownership Percentages

• Voting Rights

• Distribution of Profits and Losses

• Structure of Management

• Rules and Procedures for Buying and Selling

• Departure or Death of a Member

The guidance of a licensed attorney with experience in business formation ensures operating agreements are tailored for your company’s needs. 

For more information, contact The Law Office of Katherine Kim, PLLC at (214) 814-5123 or admin@katherinekimlaw.com to book a consultation.