This section might also include the effective date of the Operating Agreement and a list of terms and definitions used in the document. Most LLC Operating Agreements open by recording basic information about your LLC, like its name, purpose, business address, California registered agent information, and the names of all members. Organization / Formation Division of Ownership Management Voting Rights Capital Contribution Distributions of Profits and Losses Membership Changes and Transfers Dissolution Signatures Hire California Registered Agents Organization / Formation If – heaven forbid – you end up fighting a lawsuit, you’ll want to have an Operating Agreement in your arsenal. It’s one tool you have to demonstrate the legal separation between you and your business. An Operating Agreement doesn’t provide iron-clad protection against lawsuits, but it certainly helps. Letting your personal and business affairs intermingle can erode the separation between you and your LLC, leaving you vulnerable to lawsuits.

To preserve it, you need to maintain a clear separation between your personal life and your business life. It protects your members from being held personally liable for business debts. But your limited liability status isn’t set in stone. Limited liability is one of the most attractive qualities of the LLC structure. It can help protect your limited liability status.If you want to buy land or borrow money, you’ll need your Operating Agreement for that, too. This means that an LLC Operating Agreement – signed by all members – is the only document you have to prove to a third party who owns the LLC. Who will need proof? Your bank, to begin with. If your LLC is managed by managers, your Statement of Information may not list members, either. The California Articles of Organization do not list members. These default rules might not be in the best interest of your company. If your LLC Operating Agreement doesn’t address these default rules, your LLC will automatically be governed by them.

In 2014, The California Revised Uniform Limited Liability Company Act vastly expanded California’s default rules. What will you do if a member wants out? How will you vote to make decisions? Who gets paid what? Getting all of this down in your Operating Agreement can help you prevent misunderstandings and disputes down the road. Like we said earlier, your Operating Agreement defines how your LLC will operate. But no matter where you’re doing business, it’s important to have an LLC Operating Agreement: Technically, you don’t need an operating agreement.

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