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Creating an operating agreement for your LLC

On Behalf of | Jul 21, 2022 | Business Formation |

There are many ways to form a new business in New York. One of the most common is to create a limited liability company (LLC). This will give you a business arrangement with more personal protection but less formality to complicate things. The key to a successful LLC arrangement is to have an operating agreement that regulates how your business runs.

The essential point of an operating agreement

Although the structure of an LLC represents a much less formal business formation, there will still be some paperwork that you will have to complete. This will be to ensure that the formation of your LLC entitles you to all of the advantages that come with this arrangement. This paperwork will include an operating agreement.

The agreement that you sign with the other founders of your business lays down the rules and regulations that the company operates by. This sets up the titles, duties, spheres of responsibility, and salaries that each of you has access to. It can also lay down ways to solve issues so that you don’t have to end up fighting each other in court.

The main advantages of an operating agreement

Your New York LLC formation must be recognized by the state, which is the main reason to have an operating agreement in place. Without this agreement, your business can be considered too close to a sole proprietorship or partnership. This can jeopardize the personal protection that you enjoy.

An operating agreement allows you to decide how to settle disagreements that may arise. It also provides rules for voting out or buying out a partner who is no longer on the same page. These advantages make an LLC an attractive option for company formation.

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