Understanding the Operating Agreement in Business and Corporate Law
Every Florida business is built on a foundation. The foundation is an agreement or some sort of ground rules for the business. Today, the business and corporate law attorneys at Kelley, Fulton and Kaplan will discuss the operating agreement and why it is important for a business’s needs.
What is an Operating Agreement?
The operating agreement is a document that includes details about how the business will operate and also discusses the financial management of the business. The operating agreement also includes the following:
- The name of the members of a limited liability company (LLC)
- The members’ interest in the business
- The members’ rights and obligations to the business and each other
- How the business pays taxes
- How the business distributes profits and losses
- What to do when a member leaves the company
- Procedures for dissolving the business
Although Florida law does not require businesses like LLC’s to have an operating agreement, the document is necessary for general business operations. Without an operating agreement, an LLC does not have directions to follow when things happen.
Why Do Businesses Need Operating Agreements?
Operating Agreements, much like the bylaws, is a business formation document. It establishes the structure for the operation of the company.
The operating agreement is necessary for general and major business purposes such as:
- Opening a business bank account
- Buying real estate
- Obtaining financing
- Looking for investors and partners
- Resolving shareholder and partner disputes
If your business is looking to get a loan or a line of credit, it will be difficult to achieve this step without a well-written operating agreement.
Additionally, if a business is involved in litigation with a creditor or any other type of legal action, the attorneys, as well as the court, may request copies of the business’ operating agreement.
Must the Operating Agreement be Filed with the State of Florida?
No. The operating agreement is not to be filed with the state. It is not a document that is viewable for public record. The operating agreement is an internal document, for business records only and is to remain with the business at all times.
How to Write an Operating Agreement
You can write an operating agreement on your own with the many online templates available today. However, the templates are not tailored specifically to your business and your business operations.
Each business is unique and comes with its own set of circumstances. What works for your friend’s business may not work for your business. Even if you decide to write your own operating agreement, have an experienced West Palm Beach business and corporate law attorney review your operating agreement and make necessary changes, that will tailor it for your specific purpose.
When You Need Help Writing Your Business Operating Agreement, Contact Our West Palm Beach Business & Corporate Law Attorneys.
If you recently formed a Florida business in West Palm Beach and need help drafting your business operating agreement, contact Kelley, Fulton & Kaplan at 561-264-6850 for a consultation. Our experienced West Palm Beach business & corporate law attorneys will write your operating agreement right, the first time and make sure your business starts off on the right path.