Question

What is the purpose of an operating agreement, and what benefits does it afford an LLC?

What is the purpose of an operating agreement, and what benefits does it afford an LLC?

Homework Answers

Answer #1

An operating agreement is a legal agreement among the members of an LLC.

The purpose of an operating agreement

An operating agreement will provide facts about the LLC's management, the sharing of profits and losses, and other inside actions.

Benefits of an Operating Agreement

  • Usually, an Operating Agreement provides clarity regarding members and managers.
  • LLC can evade Management conflicts by providing how problems resolved.
  • If an operating agreement exists, it will indicate dispute resolution, selection of venue, and jurisdiction.
  • The operating agreement is essential for deciding how member conflicts resolved and how members can withdraw from the LLC.
  • Operating agreements may also explain unexpected circumstances. For instance, what would happen if a member deceased?

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