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Taking the Next Step: Why Your LLC Needs an Operating Agreement


Taking the Next Step: Why Your LLC Needs an Operating Agreement

When you form an LLC, you need to draft articles of organization that comply with the state’s LLC act and then file the articles with the appropriate state office. However, the articles of incorporation are broadly worded and likely don’t address members’ rights and responsibilities. Therefore, it is essential to consider the extra step of creating a written operating agreement. This agreement provides operational rules for running the business and can override or alter the default rules in your state’s LLC act to better meet your needs.

With the operating agreement, you:

1. increase the LLC’s limited liability protection by making it more difficult to “pierce the veil,” because the operating agreement makes your LLC appear more business-like;
2. can prevent the unwanted dissolution of the LLC, which distributes the assets to the members with no LLC shield from creditors’ claims; and
3. can create the plans you need in case of death, divorce, or withdrawal.

And there is an extra bonus: the tax rules allow you to deduct up to $5,000 in organization costs immediately and then amortize the balance over 180 months when you hire an attorney to get your LLC in place with an operating agreement.

If you would like to create an operating agreement for your LLC, please don’t hesitate to contact us. Help is just a click away.

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  • 4 Aug, 2017
  • Karina Torres
  • Global Law, Operating Agreement, Tax Deductions,

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