| If you're starting a single member LLC, it's pretty | | | | will look to resolve the problem. |
| obvious who owns it--you. | | | | If you incorporate your LLC with an attorney, you will |
| But what if your business, like so many, require multiple | | | | certainly pay more than you would with an online |
| owners to get it started? Sorting out who owns what, | | | | service. However, one thing that you will get with an |
| how profits are shared, losses covered, and what | | | | attorney that you will not get with most inexpensive |
| happens if your LLC falls apart is something to know | | | | (under $300) online incorporators is a custom drafted |
| now...not months or years into the business. | | | | Operating Agreement. |
| The Organizer | | | | What Happens If You Don't Have An Operating |
| Your LLC is born when you file Articles of | | | | Agreement? |
| Organization with your state. This is when the LLC | | | | There's a myth that if you die without a will, the state |
| officially comes to life. Every state requires that | | | | takes all your money. In fact, if you die without a will, |
| someone sign the Articles of Organization as the | | | | what happens is that your assets are divided among |
| "organizer". This is the person filling out the paperwork. | | | | your spouse and/or relatives according to a formula |
| An organizer can be a member (owner) of the LLC, or | | | | set under state law (and the formula differs with each |
| an attorney forming the LLC for the owners. | | | | state). |
| The organizer's sole role is to sign the paperwork | | | | Same is true if you form an LLC and never sign an |
| forming the LLC. | | | | Operating Agreement. You LLC exists, however, the |
| Members | | | | rules of profit and loss sharing, withdrawal of |
| Members are the owners of an LLC. Very similar to | | | | members, and winding up your LLC are all controlled |
| shareholders in a corporation or partners in a | | | | by state "default" rules. I bet you don't know your |
| partnership. In some states, the Articles of Organization | | | | state's default rules. In fact, I don't know them off the |
| will have a space for you to list the initial members of | | | | top of my head either. |
| the LLC. Some states, like New York, do not. | | | | That is one very good reason to have an Operating |
| However, this filing is NOT conclusive proof of | | | | Agreement if there is more than one member of your |
| ownership. Instead, ownership of an LLC is controlled | | | | LLC. |
| by a different document, perhaps the most important | | | | An Operating Agreement is particularly important if a |
| document in an LLC, the: | | | | dispute arises among members. Without a written and |
| Operating Agreement | | | | signed Operating Agreement, I can tell you that litigation |
| The Operating Agreement is THE document for | | | | will be extremely difficult and nasty, as it will be one |
| determining ownership of an LLC. Actually, the | | | | person's word against the other's. Nasty litigation |
| operating agreement does more than list ownership of | | | | usually means expensive litigation, and that's the last |
| the LLC. It operates to allocate profits and losses, | | | | thing anyone needs. |
| establishes voting systems (majority, super majority, | | | | Getting Your Operating Agreement |
| unanimous), how assets will be divided if the LLC shuts | | | | One of the services provided by LegalZoom is a |
| down, and what happens if a member withdraws from | | | | customized Operating Agreement. Even their lowest |
| the LLC. | | | | priced, $139 Economy Package (as of 2007), includes |
| When there is a dispute between members/owners | | | | a customized Operating Agreement. |
| of an LLC, the Operating Agreement is where a court | | | | |