Operating Agreements

The operating agreement (“OA”) is the governing document for limited liability companies. It outlines the financial and functional decisions that LLC members may or must make, such as what expenses require a vote or who can be admitted as a new member. Thus, the OA acts as the governing document spelling out what actions may or must be taken by the members (and the managers in the case of a manager-managed LLC).

Michigan does not require an OA, and most LLCs resist the cost of having an attorney draft an OA. Instead, they either forego an OA entirely, or get a template OA online. But going with a boilerplate OA can be problematic down the road. A boilerplate OA does not reflect the particular intricacies of a business. For example, the members of an LLC may want more or less flexibility to admit new members than is permitted by a generic OA. Alternatively, a boilerplate OA may not permit members to expel a member.

Having an attorney draft the OA permits the OA to be tailored to the business. Just as there are differences in what businesses produce or do, the OA should reflect those differences. An OA for a manufacturing LLC is much different than an OA for a software development LLC.

If your LLC needs an operating agreement, or you need an OA reviewed, please contact Benjamin Long of Schmidt and Long.