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Q.What is the Operating Agreement?
A.Next to the Articles of Organization, the operating agreement is the most important document in the LLC. While many states do not require the operating agreement to be in writing, it is foolish not to have a formal detailed operating agreement prepared. For most LLC’s. the operating agreement should be between 35 and 75 pages, depending on the number of people involved. However, single-member LLC operating agreements tend to be only about 15 pages. The Operating Agreement, at a minimum, should address the following:
- Whether the LLC is Member or Manager Managed;
- The numbr of members;
- The member's duties, rights and obligations;
- The member's voting interests;
- The method for choosing managers, their terms, duties, and salaries;
- The method for calling meetings, and the time and place for meetings;
- The Capital Structure and Financing Mechanisms;
- The profit and loss distribution;
- The record keeping procedures;
- The member's withdrawal and termination rights;
- The member's right to sell or transfer Membership Interests; and
- The duration (life) of the LLC.
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