As a business owner, you need to ensure your enterprise operates smoothly and securely. One critical document to achieve this is an operating agreement. This legal document serves as the “law of your business,” governing how your company is managed and protecting your interests as a business owner. Here’s why you need an operating agreement, right now!

Your personal assets may not be protected.

First and foremost, an operating agreement protects your personal assets. By establishing a formal structure for your business operations, you delineate your business entity from you as an individual. Without this separation, there is a risk that your business could be viewed as an “alter ego,” meaning creditors and other parties could potentially go after your personal assets to satisfy business debts or losses. An operating agreement creates the necessary formalities to safeguard your personal wealth from business liabilities.

It creates a mechanism for your business to raise capital.

If you’re looking to secure a business loan or line of credit, or if you’re considering bringing on an investor or additional owner, an operating agreement is often a requirement. Banks and investors typically insist on reviewing this document to ensure the business is well-structured and operates under clear and defined rules. Without an operating agreement, you might find it challenging to access the funds needed to grow and sustain your business.

Without it, you are at the mercy of General State Law.

General state laws governing LLCs can impose regulations and rules that might not align with your vision or needs for your business. By having an operating agreement, you maintain control over how your business is run, tailoring the structures to fit your specific requirements and preferences. This autonomy is crucial for effective and efficient business management.

An operating agreement is more than just a legal formality; it is a critical tool for protecting your assets, facilitating capital opportunities, and maintaining control over your business operations. As a Senior Associate at Transcendent Law Group, I strongly advise business owners to prioritize the creation of an operating agreement. It is an investment in the security and success of your business, ensuring you are well-prepared to navigate the complexities of business ownership. Get in touch today! We can help you create your operating agreement to secure your business’s future.