The Company Agreement (Operating Agreement) Explained
June 16, 2013 | By Vela Wood
So you just formed your Limited Liability Company and you received a long boring document with a lot of legal mumbo jumbo and then a signature line at the end.
Anytime you see lots of fine print and terms you’re not comfortable with it can be a bit overwhelming.
Don’t sweat it, we’re going to tell you.
The VW blog will generate an interesting and informative series to help you understand that document, the Company Agreement.
The backbone of any LLC is a well-drafted Company Agreement. One of the most appealing aspects of an LLC is its flexibility (it can look just like a partnership, a C-Corp, or an S-corp), but LLCs generally aren’t bound to the same stringent corporate governance rules that many other entities must follow. An LLC is only as good as its governing documents.
At VW we provide a thorough Company Agreement for clients that will satisfy their immediate company needs, and allow for future growth. When you’re starting a company, it can be information overload. Especially in regards to the Company Agreement. So to help answer a lot of the common questions we get, we’re going to write a series of blogs that will discuss and answer some of those questions.
Here’s the plan for now, but this is subject to change based on your feedback:
- What exactly is a Company Agreement? What if I don’t have one?
- Why do I need a Company Agreement if I have a Certificate of Formation?
- What is a Capital Contribution?
- What are Classes of Members?
- Managmeent of an LLC – Member Managed vs. Manager Managed
- Decision Making in an LLC- Simple Majority v. Super-Majority
- Why are Fundamental Business Decisions Important?
- Meetings of the Managers
- Meetings of the Members
- Confidential Information and Non-Competition
- What is a “Tax Matters Partner”?
- Involuntary Transfers vs. Voluntary Transfers
- Dispute Resolution Ideas
- Default of a Member & Expulsion of a Member
- Buy-Sell Provisions
- Fancier Provisions Part 1: Drag Along & Tag Along
- Fancier Provisions Part 2: Put or Call Options
We’ll release these every week or so. Stay tuned and enjoy.