A clear Operating Agreement helps avoid misunderstandings and potential litigation between LLC members by setting clear expectations.
An LLC Operating Agreement should define each member’s ownership interest and detail their specific rights and responsibilities within the company.
This is crucial because LLC member names are not included on any publicly filed documents in Delaware; your internal Operating Agreement is the only document that describes the rights, responsibilities, and ownership interest of each LLC member, and is the only way an LLC member can prove their ownership.
Banks and other financial institutions typically require a signed copy of the LLC Operating Agreement to open a business account for a Delaware LLC. This is because the bank requires proof that the person trying to open the account is properly authorized to act on behalf of the Delaware LLC.
While Delaware law allows an LLC Operating Agreement to be “written, oral, or implied”, having a written LLC Operating Agreement is the only way to make the agreement enforceable. Without it, legal decisions might be based strictly on state law, which may not be in the best interest of the LLC or its Members.
A well-defined Operating Agreement allows members to dictate how the LLC is run, including how decisions are made, rather than defaulting to standard state law provisions that might not fit your specific business needs.
SINCE 1974
