Missouri is one of the many states in the United States that allows the formation of limited liability companies (LLCs) for businesses. An LLC is a business entity that protects its owners by limiting their liability for the company’s debts and other obligations. One of the most important documents required for an LLC is the operating agreement. But does Missouri require an LLC to have an operating agreement?
The answer is yes. Section 347.081.1, RSMo, requires an LLC to have an operating agreement, even though such a document is not required to be filed with the Secretary of State. An operating agreement is a legal document that outlines the ownership structure, management, and operation of the LLC. It is a contract between the members of the LLC that sets forth the rules for how the business will be run.
How is an Operating Agreement Useful?
Having an operating agreement in place can help prevent disputes between members by clearly defining their roles and responsibilities. It can also help protect the LLC’s limited liability status by demonstrating that the business is a separate entity from its owners. In addition, an operating agreement can help secure financing and attract investors by providing a clear picture of the company’s structure and operation.
Without an operating agreement, the LLC will be subject to the default rules outlined in Missouri’s LLC statute. These rules may not be suitable for every business and may not reflect the members’ intentions. The members can customize the rules by creating an operating agreement to fit their specific needs and goals.
How Do You Create an Operating Agreement?
Creating an operating agreement is simple but requires careful consideration and attention to detail. The agreement should include provisions that cover the following topics:
- Ownership structure: This section should outline the percentage of ownership held by each member and any restrictions on transferring ownership.
- Management: This section should specify who will manage the LLC and how decisions will be made.
- Capital contributions: This section should detail how much each member has contributed to the LLC and how additional contributions will be made.
- Distributions: This section should explain how profits and losses will be allocated among the members.
- Dissolution: This section should outline the process for dissolving the LLC if necessary.
- Dispute resolution: This section should specify how member disputes will be resolved.
In addition to these provisions, an operating agreement may include other terms and conditions specific to the LLC’s business or industry.
In conclusion, law firms in Missouri do require an LLC to have an operating agreement, and even if it weren’t, it is strongly recommended that every LLC have one. An operating agreement can prevent disputes, protect the LLC’s limited liability status, and provide a clear picture of the company’s structure and operation. Creating an operating agreement may seem daunting, but it is a worthwhile investment in the long-term success of the LLC.
Do you need help with your operating agreement or have questions about any aspect of your business? Contact Brydon, Swearengen, and England today!