As its name suggests, a limited liability company (LLC) provides its owners (known as “members”) with limited liability. Across the nation, LLCs are a popular business form for people starting up new businesses.
While it’s highly recommended that LLCs have operating agreements, in many states, there’s no legal requirement for an LLC to have an operating agreement. But if you’re setting up your LLC in Missouri, Missouri’s law does require you to have an operating agreement. Unlike your LLC’s articles of organization, however, you are not required to file your operating agreement with the Secretary of State.
What is an LLC Operating Agreement?
An LLC’s operating agreement is a formal document that outlines the rules by which the LLC conducts its business. Even if your LLC is a single-member LLC (meaning you’re the only member), it’s handy to have an operating agreement. And if your LLC is a multi-member LLC, it’s essential that it be well-drafted, as your operating agreement is the document that governs exactly how your LLC will be run and operated, and what each member’s rights and responsibilities are.
Missouri law doesn’t stipulate what provisions need to be included in an LLC’s operating agreement. Since your operating agreement addresses how your LLC conducts its business, it’s always a good idea to consult with an experienced attorney when drafting your agreement, to be sure your operating agreement contains all the provisions it needs. Examples of provisions you might want to consider including in your operating agreement include:
- Member contributions
- Voting rights
- Member compensation
- Dispute resolution
- Transfer of LLC interest/right of first refusal
- Admission of new members
- Scheduled/regular meetings
- Death of a member
How Does an LLC Operating Agreement Protect Your Business?
Your LLC’s operating agreement helps to protect your business in multiple ways:
- Legal requirement. Missouri law requires LLCs to have an operating agreement.
Even though there’s no requirement that you file your agreement with the Secretary of State if you don’t have an operating agreement your LLC runs the risk of having its status as a limited liability company revoked.
- Provide clarity. Especially for multi-member LLCs, an operating agreement helps to make clear the rules and regulations that govern how the LLC conducts its business. This extends to each member’s rights and duties. Having these rules set down formally within your operating agreement reduces the potential for future conflict over how things should be done.
- Manager-managed LLCs. If LLC members decide not to manage the LLC themselves (a member-managed LLC), they must choose a manager or managers to run the company. This is done in the operating agreement, and it’s also prudent to include the rules governing the managers’ authority in the agreement as well.
Need an Operating Agreement for Your LLC?
If you’re planning to set up an LLC in Missouri, you’ll need an operating agreement. Speak with one of the Springfield business lawyers at Parks & Jones about what you need to include in your LLC’s operating agreement. Contact us today to find out more.