Operating Agreements and Single-member LLCs
A single-member LLC refers to a business that is owned by one person. The SMLLC is similar to a sole proprietorship but because it has the advantages of limiting your liabilities and acting like a real business. With the Louisiana LLC operating agreement, that is one of the ways that it will act as a real business as it will have the same documents as other LLCs.
An LLC that has more than one owner, which are referred to as members, typically has an operating agreement document, which is usually prepared with the attorney’s help at the beginning of the business.
What is an operating agreement?
It is a document that describes the LLC operations, setting forth the agreement that exists between owners/members of the business. Any LLC that has more than one member needs to have an operating agreement. It is a document that is not required for all LLC, but it is just a good idea to have it.
It is similar to bylaws, which guide a corporation's board of directors, and the partnership utilizes an agreement partnership. Bylaws are required for any corporation, but a partnership agreement is not required. The partnership agreement and the LLC operating agreement are almost the same; these two types of business documents function in the same way.
Why have an SMLLC agreement is an idea is good
If you are a single owner of an LLC, it is necessary to have an operating agreement. The following are some of the reasons why you should have it and abide by it.
The operating agreement describes the organization
An operating agreement describes the LLC operations, listing the formation of the business and procedures that are followed by the business. The agreement is also what clarifies the way the LLC funds are distributed and contributed to the owner. It is a discussion that helps the business owner and an excellent way to make sure that appropriate records are kept of proceedings.
Separating the owner from the business
Having to keep records and the operating agreement of operations helps establish the business separateness from the liability of the owner and for tax purposes. If you don’t have an operating agreement, you might find it hard to show that your business is separate from you. This is very important, mainly if there is liability use.
Clarifying business succession
There is clarification in the operating agreement regarding way forward in case of the death of the owner or the owner happens to be incapable of running the business. It creates a plan for succession. The operating agreement has to include a clause that stipulates who will be managing the LLC if you become unable to do so. Without such a provision, it might be hard for your family to continue the business or dispose of it without a lengthy legal battle.
Avoiding the LLC state default rules
If an LLC doesn’t have an operating agreement, it is subject to the rules of default of the state where the LLC was formed. The state typically sets out the default rules. Allowing the state to tell you how to dispose of your assets for the business is not what you want when it comes to your LLC