Why Your Multi-Member LLC Needs An Operating Agreement?

Firstly, recall that an operating agreement is the document that describes how your business will be governed. It lays out the rights of responsibilities of the member’s for managing the company and the member’s financial rights and duties.

The first point to consider is that without an operating agreement your business will be subject to the default rules of North Carolina LLC statutes. These rules are designed as one size fits all. If your business is a size XXL, it’s going to be pretty uncomfortable wearing a size Medium. An operating agreement allows you to have a customized, or bespoke, set of rules that say how you run your business.

Tailoring your LLC Operating Agreement provides the advantage of choosing exactly how profits will be split and when distributions will be made, what the work load of each member will be, and much more.

One of the primary advantages of choosing the LLC form for your business is how unrestrictive the form of entity is. Without an operating agreement, you are essentially forgoing many of the benefits that an LLC affords your business. With an operating agreement in place the LLC can be customized exactly to your business needs.

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