Hiring a lawyer for an operating agreement can help you manage your business better when you run an LLC. As an entrepreneur sharing your company with others, it’s essential to establish clear rules, responsibilities, and requirements for each member.
An operating agreement is a legal document that establishes the rights and responsibilities of each LLC member.
Operating agreements cover details such as:
- How decisions are made
- When meetings are held
- How members are admitted to the company’s board
Overall, you can rely on an operating agreement to outline your business's administrative processes and management details.
Working with an operating agreement lawyer can help each member clarify their role within the limited liability company. The lawyer will work with the members to draft a document that wholly reflects their shared vision and responsibilities.
Here is an article that defines an operating agreement in business.
What Does a Lawyer for an Operating Agreement Do?
A lawyer for an operating agreement writes legal documents for their clients. In addition, they draft operating agreements for different types of LLCs in various industries.
When hiring a lawyer for an operating agreement, you should consider their experience and familiarity with contract law.
The lawyer will work with you and your partners to identify the key roles and processes to outline in your operating agreement. The lawyer can also mediate negotiations to ensure everyone is fully satisfied with the terms and conditions in the document.
As you work with a lawyer for an operating agreement, they will gather information about your business and compile those details into a necessary format. Then, they will ask you and your members a series of questions that will help them determine the most important information about your company.
Part of the lawyer’s process for drafting an LLC operating agreement includes the following:
- Determining ownership percentages among each member.
- Gathering each member’s contact information, including their legal names, addresses, phone numbers, and titles within the company.
- Compiling information about each member’s rights, responsibilities, and duties in the company.
- Incorporating details such as hourly or annual compensation, daily duties, performance metrics, and voting rights.
- Creating a plan of dissolution and an outline of each member’s responsibilities and duties in the event of a dissolution.
- Incorporating a severability clause that helps protect members if any portion of the agreement is found to disagree with federal, state, or local laws.
- Clarifying buying and selling rules for all organization members under various circumstances, i.e., death, termination, or resignation.
All the details that the lawyer collects will help bolster the legal protection of your operating agreement. If disputes, lawsuits, or other issues ever arise, the operating agreement will be an invaluable asset as you work toward resolution.
Here is an article with ContractsCounsels’s guide to operating agreements.
How Much Does an Operating Agreement Cost?
The average LLC operating agreement cost on the ContractsCounsel’s legal marketplace is $850.
Lawyers set their rates, and those with more experience or shorter timeframes will often charge more for their services.
You can request a free quote from vetted attorneys in your state to draft your operating agreement on ContractsCounsel.
If you decide to work with a lawyer to write your operating agreement, you should first discuss your plans with other members of the LLC. When you belong to a limited liability company, your percentage of ownership may vary. Each member’s rights can also differ based on what portion of the company they own.
Anyone in a limited liability company can divide ownership however they want. For example, the founder of the LLC may wish to retain majority ownership, even if they sign a joint operating agreement with a business partner.
Here is an article that outlines the average cost of an LLC operating agreement.
Key Terms in an Operating Agreement
The key terms of an operating agreement are important elements that protect each member’s rights as an owner of the LLC. Understanding these key terms can make negotiations more accessible while ensuring the document offers complete legal protection.
Here are the essential parts of an operating agreement you should know.
- Ownership amounts. Each member’s limited liability company ownership should be written as a percentage amount, e.g., Person A owns 30%.
- Responsibilities. Establish each member’s responsibilities and any shared responsibilities members have to the company.
- Voting rights. List each member’s voting rights and how their voting power is divided.
- Profit and loss allocations. List each member’s profits and losses, and describe the distribution among the LLC’s members.
- Rules for holding meetings and taking votes. Explain what processes must occur for members to hold a meeting with the other members and what steps they must take to vote.
- Administrative processes. Outline which members are responsible for administrative processes and how these processes are to be handled. If other members must assume these responsibilities due to a member’s death, disability, termination, or resignation, how will they do so?
- Dispute resolution. Describe a mutually agreed upon method of resolving disputes among the LLC members.
- Severability clause. A severability clause protects members of a company if any part of their operating agreement is found to violate the law.
- Buyout or sellout provisions. List what steps a member must take if they want to sell their share of the company and what happens to their shares if they pass away.
- Articles of organization. Articles of organization are also known as a certificate or formation. These documents are included to support the validity of the LLC that the operating agreement pertains to.
- Certificate of organization. The founding parties of any limited liability company must submit a certificate of organization to their state’s secretary upon forming their organization. This certificate officiates a business as a legitimate legal entity.
Here is an article with a guide on writing an operating agreement, including key components.
Do I Need a Lawyer for an Operating Agreement?
You may benefit from hiring a lawyer for an operating agreement. Business contracts can be lengthy and complex and must follow specific federal and state guidelines to be valid.
If you sign an operating agreement that omits certain clauses, it could be null and void. In the event of litigation, this would make your LLC partnership illegitimate and your contract unenforceable.
Consulting with a lawyer for an operating agreement also grants you access to their inside knowledge and expertise.
Lawyers working with small businesses are consequently well-versed in business law and best practices. As a result, they can ensure that your limited liability company agreement covers every process and includes provisions that protect each member’s rights.
While you can use an operating agreement template online to draft your LLC agreement, it may be best to submit it to a lawyer for professional review. Attorneys can tell you whether an operating agreement would be legally enforceable in court.
Here is an article with an example of an operating agreement.
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