What does an LLC operating agreement cost? This is a common question when looking to start a new limited liability company . Let’s explore this question and also review some general information about LLC operating agreements.
How Much Does an LLC Operating Agreement Cost?
An LLC operating agreement is a legally binding document that outlines how a business will be operated and governed. LLC operating agreements will usually include crucial information like management structure, investments, taxes, and profit sharing.
Getting help from an LLC operating agreement lawyer to draft an operating agreement is highly encouraged since these are important documents that outline how a business will run and are key to their success. While most states do not require and LLC to have an operating agreement, many LLC owners choose to have one anyway.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving an LLC operating agreement is $664 .
LLC operating agreement costs can depend on many variables, like the service requested, the complexity of the document, and the number of custom terms needed to be included in the document.
What is an LLC Operating Agreement?
An LLC operating agreement is a legal document that outlines the roles and responsibilities of all the members and managers in a company and helps to avoid and solve any business disputes that may arise.
What’s Included in an LLC Operating Agreement?
LLC operating agreements can vary based on the size and organization of the company, but most operating agreements include the following important terms:
- Organization. The organization is the creation of the company. It should include the date the company was established, names of all the members, and the ownership structure.
- Management and Voting. LLCs can be member-managed or manager-managed . This important management structure needs to be clearly defined in the operating agreement. Each member will also have specific voting rights for making decisions within the company.
- Capital Contributions. This section will record which members contributed money to start the LLC and how additional money can be raised by members.
- Distributions. Distributions refer to how the company’s profits and losses will be shared among the members. This can include actual money, property, or business assets.
- Membership changes. An LLC operating agreement needs to include rules for how members are added or removed from the company. This section will lay out rules for transferring ownership or what happens if a member dies.
- Dissolution. The final section will outline the ways a company can be dissolved.
Who Needs an LLC Operating Agreement?
Only five states require that LLC’s have operating agreements:
- New York
While an operating agreement isn’t required in any other states, many LLC owners and members still choose to have this document as a legally binding document outlining how the company will be governed and operate. LLC operating agreements are recommended especially for multi-member LLCs . When various members are involved in running an LLC, and operating agreement is used to define each members roles and responsibilities and settle disputes.
LLC Operating Agreement Projects
LLC Operating Agreement Drafting
Many LLC owners will hire a knowledgeable lawyer to help consult and draft an operating agreement that fits the requirements of their company. This is where the company will incur operating agreement costs.
LLC operating agreement drafting typically involves a consultation with the LLC partners to learn about the terms they want include in the agreement, then implementing those terms into an LLC operating agreement template to make sure it includes everything the business needs. LLC operating agreement costs can vary based on how many custom terms need to be included in the document.
Reasons you may need to find a lawyer to draft an operating include:
- Forming a New LLC. You may want to form a new LLC and need to draft an operating agreement from scratch.
- Partners Want Custom Terms. LLC members may need to hire a lawyer if they know they have very custom terms that won’t fit in their current operating agreement template.
LLC Operating Agreement Review
In some circumstances, partners may have an existing LLC operating agreement that was signed when they started the business. Given the fact that businesses evolve, they may require a lawyer to review the current agreement in order to answer questions or implement updates.
Reasons you may need to find a lawyer to review an operating agreement include:
- Make Sure It Fits Your Business. Members may have used a template but want to get it double checked by a lawyer to make sure it has everything they need.
- Update the Agreement with New Terms. As an LLC grows, members may require new terms or updates to their current operating agreement.
- Member Has Questions. One of the members may have a question about their obligations or rights and may want to hire a lawyer to independently review the operating agreement they signed.
- Major Change. The company may be expecting a major upcoming change and need to get the LLC operating agreement reviewed.
LLC Operating Agreement Drafting Cost
Drafting an LLC operating agreement comes with costs because it requires the time of a licensed lawyer to complete the project.
ContractsCounsel’s marketplace data shows the average LLC operating agreement drafting costs to be $628 across all states and industries.
LLC Operating Agreement Review Cost
Hiring a lawyer to review an LLC operating agreement will also come with fees. The attorney will take time reading over the agreement to analyze the terms and consult with the partners.
ContractsCounsel’s marketplace data shows the average LLC operating agreement review costs to be $950 across all states and industries.
How Do Lawyers Charge for an LLC Operating Agreement?
Business lawyers charge for services in a variety of ways. Depending on the complexity of the project, the lawyer will typically suggest fee options to the client.
Hourly Rates for LLC Operating Agreements
Many lawyers prefer to bill their time at an hourly rate. The lawyer will provide an hourly rate to be approved by the client and log time in a timesheet to be invoiced at the end of the project for time spent on the LLC operating agreement. This fee structure ensures that a lawyer is paid for their work especially if the project takes more time than expected.
ContractsCounsel’s marketplace data shows the average hourly rate for a business lawyer ranges from $250 - $350 per hour.
Flat Fee Rates for LLC Operating Agreements
Flat fee billing structures are becoming increasingly popular for contract drafting projects. In this fee structure, a lawyer will provide a flat-fee rate to the client for the project. The benefit of flat fee billing is it provides certainty to the client on the total cost of the project. It is important to make sure the client knows what’s included with the fee before starting the project, as it may not include rounds of revisions.
ContractsCounsel’s marketplace data shows the average flat fee rate for an LLC operating agreement costs to be $664 .
Get Help with an LLC Operating Agreement
Do you need help with an LLC operating agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.