In Georgia, having an operating agreement is not a prerequisite when starting an LLC. But it is one of the most important documents a company can have.
Understanding an LLC operating agreement
An LLC operating agreement is a legally binding contract between the members of an LLC that outlines the company’s ownership structure, member roles and responsibilities, voting rights, and profit and loss distribution. It works by organizing the company’s business affairs and member relationships in a way that will avoid future disputes.
Reasons why an operating agreement is important to a business
There are several reasons you should have an operating agreement for your LLC, even if it is not required by state law. The main ones are:
1. An operating agreement can help prevent personal liability for business debts and obligations.
2. It can help resolve disagreements between members about important decisions, such as how profits will be distributed or what happens if a member wants to leave the LLC.
3. It can provide clarity about the company’s ownership structure and member roles and responsibilities.
4. It can help prevent the state from governing your business because, without an LLC agreement, Georgia default rules will be imposed upon your company.
Operating Agreement Requirements in Georgia
There are no specific requirements for LLC operating agreements in Georgia, but you should follow some general guidelines. They include:
• The agreement should be in writing and signed by all members of the LLC.
• It should outline the company’s ownership structure, voting rights, profit and loss distribution and member roles and responsibilities.
• Rules regarding holding of meetings.
• It should be kept in the company’s records.
Changing the terms of an LLC operating agreement
According to business law, you can change the terms of an LLC agreement by unanimous vote of all members. Nonetheless, a vote by the majority of members can also work if all members are given notice of the proposed changes and a reasonable opportunity to object to them. The court can also change the terms if it finds that the change is necessary to prevent fraud or injustice.
An LLC operating agreement is basically a tool that gives you complete control over all aspects of your business. You won’t be breaking the law for not having one, but if you do, violating the terms of your agreement can land you in trouble.