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Home Q&A Forum Is it necessary for my small business to have an Operating Agreement?
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Limited Liability Company

Operating Agreement

California

Asked on Sep 3, 2024

Is it necessary for my small business to have an Operating Agreement?

I recently started a small business with two other partners, and we are in the process of formalizing our business structure. While researching, I came across the concept of an Operating Agreement for LLCs. I understand that an Operating Agreement is not required by law in some states, but I'm wondering if it is still necessary or beneficial for our business to have one. I want to ensure that we have clear guidelines and provisions in place that outline each partner's rights, responsibilities, and ownership percentages, as well as address potential scenarios such as the death or departure of a partner.

1 Attorney answer

Answer

Limited Liability Company

California

Answered 7 days ago

Dolan W.

ContractsCounsel verified

Business Lawyer
Licensed in California
Free Consultation

Hello! In my experience, it is often extremely helpful to have an operating agreement. An OA is generally not required by law; however, there are significant benefits: 1. You and your partners can be clear on the terms of ownership of shares, voting, and what happens in a dissolution. 2. Even if you are a sole operator, if you ever intend to sell the business, having an OA appears more professional; and 3. In the event of your incapacity or death, the OA will still be binding nevertheless, making it easier for any guardians to protect your wishes. On my page, you can find a package I offer to draft operating agreements - https://app.contractscounsel.com/lawyer/my-profile/check#Packages Best of luck!

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