What is a Limited Liability Company Operating Agreement?
In North Carolina, a Limited Liability Company (LLC) Operating Agreement is a foundational document of company governance that serves as an agreement between the members (owners of a North Carolina LLC) of an LLC. The Agreement establishes the rules of company governance and the rights, powers and entitlements of each member. Once executed by the members of an LLC, the Operating Agreement is a valid enforceable contract, which binds all members to terms of the Agreement. The terms and provisions of Operating Agreements can be varied to satisfy the unique needs of various businesses. Essentially, an Operating Agreement should serve as the company Constitution, whereby it is a foundational document for the company that installs a suitable framework for company growth and prosperity.
Frequently Included Provisions
Typically, Operating Agreements include terms regarding company management, company purpose, purchase and sale provisions of membership interests, tax issues, control of company assets and bank accounts, wind up procedures, voting procedures and other provisions.
Operating Agreement’s Impact on North Carolina LLC Act
For many aspects of corporate governance, the North Carolina Limited Liability Company Act (the Act) governs North Carolina LLCs in the absence of properly adopted and executed LLC Operating Agreements. This often results in undesired results for LLC Members, which can lead to uncertainty and confusion about Member rights and obligations under the Act and litigation over disputes of the aforementioned rights and obligations.
This blog is not to be construed as legal advice. Drafting LLC Operating Agreements can be cumbersome when attempting to create legally operative agreements that achieve desired provisions and structure of a particular companies. Operating Agreements are not universal and should be carefully drafted by licensed Florida Business Attorneys and North Carolina Business Attorneys and carefully reviewed by LLC members with interpretation advice from counsel before execution. To schedule a consultation today, contact Biazzo Law, PLLC.
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