Operating Agreement of a Limited Liability Company
A limited liability company (“LLC”) operating agreement is a legal document that outlines how an LLC will operate. It sets out the rights and responsibilities of the LLC’s members and managers, and provides guidance for how the company will be managed, how profits and losses will be allocated, and how disputes will be resolved.
The operating agreement is a private document that is not filed with the state, and it can be customized to meet the unique needs of the LLC and its members. It is an important document for the LLC, as it can help avoid disputes among members by clarifying expectations and providing a clear framework for decision-making.
The operating agreement typically includes provisions regarding the company’s management, how profits and losses are allocated, how members can buy or sell ownership interests, how disputes will be resolved, and how the LLC can be dissolved. It may also include provisions related to tax matters, capital contributions, and other operational details.
What should an Operating Agreement in North Carolina include?
An operating agreement in North Carolina should include the following key elements:
- Name and Purpose: The LLC’s legal name and the purpose of the business.
- Members: The names and addresses of all members of the LLC.
- Management: How the LLC will be managed, whether it is member-managed or manager-managed, and the duties of each member or manager.
- Capital Contributions: The initial capital contributions made by each member, and how additional capital contributions will be made.
- Profits and Losses: How profits and losses will be allocated among the members.
- Distributions: How and when distributions will be made to members, and how the amount of the distributions will be determined.
- Voting Rights: The voting rights of each member and the procedures for voting on important decisions.
- Transfer of Membership Interests: The procedures for transferring membership interests, including restrictions on transfer.
- Dissolution: The procedures for dissolving the LLC and distributing assets.
- Amendment: The procedures for amending the operating agreement.
The list above represents core rights, duties, and obligations that should be addressed in the operating agreement. Each LLC is different, and each operating agreement may similarly vary.
It is important to note that North Carolina state law does not require LLCs to have an operating agreement, but having one can help clarify the roles and responsibilities of the LLC’s members and managers, and help avoid disputes in the future. An operating agreement is strongly recommended.
