Operating Agreement
An operating agreement is a legal document between the owners (members) of an LLC that governs how decisions are made, contributions, and the entity's ownership. It also outlines the business' financial and functional decisions including rules, regulations and provisions.
The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owners. Once the document is signed by the members of the limited liability company, it acts as an official contract binding them to its terms. It is the only document that records each member's ownership interest.
Note: It is strongly recommended to have an operating agreement for your LLC, because it would avoid the state's LLC laws from automatically applying to your business. It is also important when you have partners because it acts as a partner agreement, so that everyone is on the same page.
References
- Basic Information About Operating Agreements | SBA
- LLC Operating Agreement | Investopedia
- NJ LLC Operating Agreement | eForms + Template