When starting a business in Wisconsin, it is important to have a clear understanding of the business entity you are creating. One common business entity is the Limited Liability Company, or LLC. Once you form your LLC, you will need to create an operating agreement.
What is an LLC operating agreement?
When you create an LLC, you also create an operating agreement, which provides information about your LLC’s owners and the type of operations it performs. This agreement gets filed with your state when you form your LLC. One of the most important benefits of an LLC operating agreement is that it protects your personal assets from being used to pay business debts. Secondly, an operating agreement can help to prevent disagreements among business owners by setting out clear rules and procedures for running the business. In business law, this form of agreement can also help to establish your business with financial institutions and other third parties. For instance, if you want to open a business bank account, most banks will require that you have an operating agreement in place.
How do you create an LLC operating agreement?
The first step in creating an LLC operating agreement is to choose a business name and register your business with the state. Once you have registered your business, you will need to draft the LLC operating agreement. This document can be created by a lawyer or an online service. Be sure to include all pertinent information, such as the names of the business owners, how profits and losses will get distributed, and what happens if a business owner wants to leave the LLC. Once the agreement gets drafted, have all business owners sign and date the document. Keep a copy of the agreement in a safe place for future reference.
Creating an LLC operating agreement does not have to get complicated. You can find templates and examples online. However, it is important to make sure that your agreement is customized to fit your specific business needs. For instance, if you have more than one business owner, you will need to decide how profits and losses will get distributed. You should also include provisions for what happens if a business owner wants to leave the LLC.