<\/span><\/h3>\n\n\n\nThe state of Minnesota doesn\u2019t require LLCs to form an Operating Agreement, but it\u2019s in the best interest of your business to do so. Without an Operating Agreement, Minnestoa state LLC law alone, rather than your own preferences, will govern your operations. This may not be exactly how you want things done in your company.<\/p>\n\n\n\n
An Operating Agreement is an internal business document that acts as both a contract between LLC members and also a list of specific instructions that describe how your business should run. The Operating Agreement should start by listing every LLC member, then go on to set up all the managerial, financial, operational, and structural facets of your business and the effective date of your LLC. <\/p>\n\n\n\n
*IMPORTANT* Prior to drafting the LLC Operating Agreement for your business, it\u2019s imperative to decide whether it will be managed by a single member or if it will use a multimember managerial system. This helps to decide who will make important decisions for your business and how. If you use a multimember managerial system, they all vote on each important business decision. If you use a single-member managerial system, one member will make all the decisions for the business. <\/p>\n\n\n\n
Operating Agreements should begin with a list of your LLC members, identify which members are granted the authority to make decisions for the business. (This is where knowing whether you want a single-member system or multimember system becomes important. You\u2019ll need to define whether one member makes these decisions or if a handful of members will get together and vote on them). Then list precisely not only the ownership percentages but also the percentages of profits and losses of each member. <\/p>\n\n\n\n
Your agreement should clearly explain the roles of each LLC member in detail and define their interactions and relationships with other departments and each other. When you design your Operating Agreement like this, you ensure that the LLC members know what their roles are, who their superiors are, which departments or members they should be interacting most closely with the most often, and which tasks and roles each department is in charge of. This will prevent unnecessary arguments between LLC members.<\/p>\n\n\n\n
One important component of LLC Operating Agreements that many people forget or neglect to include is a section with instructions about what to do if one member leaves or if a new LLC member joins the business. This is often left out of Operating Agreements, but including this section means your business will have a clearly-defined set of instructions that describe what to do in the event of a disagreement between LLC members. Having a set of logical and well-written rules in Operating Agreements for these situations can prove crucial during times of professional turmoil.<\/p>\n\n\n\n
Operating Agreements are vital documents for new LLCs during their beginning stage because an Operating Agreement explains the jobs of LLC members, lists their compensation, and supplies members with thorough instructions describing how the business should be run.<\/p>\n\n\n\n
LLCs in Minnesota aren\u2019t required by the Secretary of State to create an Operating Agreement. But if you do, (and you should) it\u2019s important that you write your Operating Agreement in much the same way I\u2019ve described it here, and don\u2019t leave out the important sections that I\u2019ve described. Leaving these sections out or screwing up your Operating Agreement could jeopardize your whole business. <\/p>\n\n\n\n
The rules that you establish in your agreement become the standards for how your business must run, so it\u2019s easy to see how a poorly-written agreement can stifle the growth of your business. It\u2019s easy to mess up your business\u2019s Operating Agreement simply by not wording it in such a way that allows for business growth, innovation, and change. If you write your agreement well, you\u2019ll be able to watch as your company flourishes. <\/p>\n\n\n\n
If you\u2019ve never created and filed an Operating Agreement and you\u2019re concerned about getting it right (which you should be), a few options available to you will ensure it turns out right. <\/p>\n\n\n\n
If you\u2019ve decided to use formation or business services, they will typically create an Operating Agreement on behalf of your company as part of their services. If you want to create the agreement yourself, check out the free Operating Agreement template<\/a> for LLCs that Northwest Registered Agent provides on their website. You can also use online legal services to guide you through the process and give you the right legal words to make the agreement work for you. <\/p>\n\n\n\n