What does a California operating agreement cost? This is a common question for LLC owners who are required to have an operating agreement in the state of California. Let’s explore this question and review some general information about LLC operating agreements.
How Much Does a California Operating Agreement Cost?
An operating agreement is a legally binding document that defines the rules and organizational structure of a Limited Liability Company (LLC). Operating agreements are executed by LLC members and should include key information such as:
- The business-like management structure
- Daily operations
- Profit sharing
In California, the California Corporations Code requires that all LLCs have an operating agreement. Operating agreements do not have to be filed with any state entity; they can be oral or implied contracts; however, many California business owners choose to draft a hard copy operating agreement.
Operating agreements are important documents and provide LLC owners in California with the following benefits:
- Proof of company ownership
- A tangible document outlining company policy and procedure
- Reinforcement of limited liability status
- An override of California’s default tax laws
- Conflict resolution among LLC members
Business owners are encouraged to consult with an attorney with experience drafting operating agreements. An attorney will know how to custom tailor an operating agreement to fit your business’s needs, protect members, and reap tax benefits.
The operating agreement cost will vary depending on the length and complexity of the document. However, based on ContractsCounsel’s marketplace data, the average cost of a project involving a California operating agreement is $687.00.
What’s Included in a California Operating Agreement?
Operating agreements for LLCs in California are regulated by California Corporations Code § 17701.10. The code suggests that the following information be included in a standard LLC operating agreement:
- Organization. The organization is the basic details of your company, including the date the company was established, a California address for the company, the names of all members, and the ownership structure.
- LLC activities. Your operating agreement should lay out the purpose of the business and what services or goods are provided to customers.
- Voting rights. Each member of the LLC will have voting rights for making decisions within the company.
- Management. An LLC management structure is set up as either a member-managed LLC or a manager-managed LLC. The structure should be evident in the operating agreement.
- Initial contributions. In a multi-member LLC, it is vital to record how much capital each member contributed to starting the LLC.
- Profits, losses, and distributions. This clause outlines how the company’s profits and losses are distributed among the members.
- Transfer of membership interest. The operating agreement should include rules for adding and removing members, transferring membership, and what happens if a member dies.
- Dissolution. The dissolution section outlines the company’s plan of dissolution, which outlines how the company can be dissolved.
- Signatures. Each member must agree to and sign the operating agreement. The agreement should be on file in a safe place and accessible to all members.
Who Needs an LLC Operating Agreement in California?
A single-member LLC and a multi-member LLC must have an operating agreement in California. The operating agreement does not have to be filed with the state and is meant to be kept as an internal business document.
The California Corporation Code allows an operating agreement to be written, oral, or implied. However, it is best practice to have a written document signed by all members.
California Operating Agreement Projects
Operating Agreement Drafting in California
Many California business owners choose to hire an experienced Attorney to draft their operating agreement. An attorney will know what information needs to be included in the operating agreement to protect the members and abide by the California Corporation Code.
Before beginning a working agreement draft, the attorney will consult with the LLC partners. After learning about the business, business activities, management structure, and daily operations, the lawyer can draft a customized operations agreement.
Operating Agreement Review in California
It is common for business owners to draft their operating agreement, especially because templates for these agreements are readily available from many sources online.
Even if an owner drafts their operating agreement, they should remember that this is a legally binding document that could affect their business. Therefore, it is recommended that business owners have a licensed attorney review an operating agreement before it is signed.
An attorney will read over the operating agreement to ensure it is correctly customized to the needs of the business and adheres to California laws and regulations.
California Operating Agreement Drafting Cost
Hiring an attorney in California to draft an operating agreement will incur legal fees because it requires the time and expertise of a licensed lawyer to complete the project.
ContractsCounsel’s marketplace data shows that California's average operating agreement drafting costs are $749.67.
California Operating Agreement Review Cost
Document review will also incur legal fees. The attorney will take time to consult with the LLC partners, read over the operating agreement, and make suggestions for revisions.
ContractsCounsel’s marketplace data shows the average operating agreement review costs in California are $499.00.
How Do California Lawyers Charge for an Operating Agreement?
Hourly Rates for Operating Agreements in California
Hourly rate fee structures tend to be more popular for most California lawyers because it is the best fee arrangement to ensure lawyers are compensated for their time.
In an hourly rate structure, an attorney keeps track of the time spent on a project and then bills the client at a set rate for the total time. Using this structure, lawyers can be sure they are fairly compensated even if a project or case takes longer than expected.
ContractsCounsel’s marketplace data shows that the average hourly rate for a business lawyer in California ranges from $200 - $350 per hour.
Flat Fee Rates for Operating Agreements in California
Another popular fee agreement lawyers choose to use, especially for contract drafting, is a flat fee rate. In this fee arrangement, after consulting with the client, the lawyer will estimate how long the project will take and then quote the client a lump sum rate for legal services. Most lawyers require payment upfront before beginning work.
A flat fee billing structure is usually more desirable for clients because they know exactly what they are charged for legal services. However, it is important to ensure the client knows what’s included with the fee before starting the project because it may not include revisions or consultations.
ContractsCounsel’s marketplace data shows the average flat fee rate for an operating agreement in California is $687.00.
Get Help with an Operating Agreement in California
Do you need help with a California operating agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers who are licensed to practice law in California. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.