![]() Much like a partnership agreement, an LLC operating agreement is meant to clearly define the interest and contributions made by each owner and to have this information recorded in a legally binding document. ![]() These numbers depend on the contributions and stakes of each individual LLC member. If a business’s starting costs are $100,000, and five LLC members contribute the same amount of $20,000 each, then each member has a 20% stake in the business. Once the value of a member’s contribution is recorded, assessing the percentage of ownership is fairly clear-cut. This includes monetizing non-capital contributions. Each member's interests in a business will need to be recorded and formalized through the operating agreement. These assets may also range from monetary contributions to others, such as properties, vehicles, or equipment. Assets that contribute to starting up a business may vary by member. However, determining the percentage of ownership for a multi-member LLC is a bit more complicated. If you are operating a single-member LLC and are therefore taxed as a sole proprietorship, then ownership determination is straightforward: You own 100% of the LLC. ![]() But most LLC operating agreements will contain a dozen or so key provisions, which we will outline and explain in further detail. It will all depend on your business and the needs of the LLC. LLC operating agreements can vary in length and the details they cover. What Should an Operation Agreement Include? But even if your state doesn't require one, it's a smart document to have. States that require you to have an operating agreement include California, Delaware, Maine, Missouri, and New York. This document cannot take effect until all LLC members have signed and approved its contents. ![]() This critical legal document defines the roles of LLC members, establishes the bylaws they'll need to follow, governs how the business will be managed, and uses conflict resolution practices to settle disputes or disagreements. ![]()
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