The Complexities of Federal Trademark Registration
Introduction
An Operating Agreement is a legal document that outlines the rules and regulations for how a limited liability company (LLC) will be operated. It is a crucial document for any LLC, as it helps to protect the personal assets of the LLC's members, defines the roles and responsibilities of each member, and establishes a framework for decision-making.
What is an Operating Agreement?
An Operating Agreement is a contract between the members of an LLC. It is a private document that does not need to be filed with the Texas Secretary of State or any other state or local authority, but it is strongly recommended that all LLCs have one in place.
Why is an Operating Agreement Important?
There are many reasons why an operating agreement is important for an LLC. Here are just a few:
- Protects personal assets: An Operating Agreement helps to protect the personal assets of the LLC's members from liability if the LLC is sued. This is because LLCs are a type of business that provides limited liability to their members. This means that the members' personal assets are generally not at risk if the LLC is sued. The Operating Agreement helps solidify this protection and clarify that members are not responsible for other members’ personal liabilities as well.
- Defines roles and responsibilities: An operating agreement helps to define the roles and responsibilities of each member of the LLC. This can help to prevent disputes between members and ensure that everyone is on the same page about how the LLC will be operated.
- Establishes a framework for decision-making: An Operating Agreement establishes a framework for decision-making within the LLC. This can help to ensure that decisions are made in a fair and orderly manner. Texas allows LLC’s a lot of freedom as to how to settle things like ties or disputed decisions, even things like letting the members flip a coin to break a tie!
- Provides a roadmap for the future: An Operating Agreement can provide a roadmap for the future of the LLC including goals, milestones, and future responsibilities of members. This can help to ensure that the LLC is on track to achieve its goals.
What Should You Include in Your Operating Agreement?
There are many things that you should include in your Operating Agreement. Here are just a few of the most important things:
- The name of the LLC: This should be the same name that is registered with the state.
- The names and addresses of the LLC's members: This is important for legal purposes.
- The LLC's management structure: This will determine how the LLC will be managed. There are two common management structures for LLCs: member-managed and manager-managed. Depending on how you want your LLC to operate, one method may be better than the other.
- The allocation of profits and losses: This will determine how the profits and losses of the LLC will be shared among the members. Popular options are to divide it evenly amongst the members or managers, or to divide it based on equity in the LLC.
- The procedure for admitting new members: This will determine how new members can be admitted to the LLC.
- The procedure for withdrawing or terminating membership: This will determine how members can leave the LLC.
- The procedure for dissolving the LLC: This will determine how the LLC will be dissolved and have its affairs wrapped up.
How to Get an Operating Agreement
You can get an Operating Agreement from a number of sources. You can find templates online, or you can hire an attorney to draft one for you. While online templates may be sufficient for a single-member LLC, there are many specific terms and clauses that are often left out of online templates or are not configured to suit you and your business. Therefore, despite the additional cost, we strongly recommend having an experienced attorney draft your Operating Agreement.
Additional Benefits
In addition to the information above, here are some additional benefits of having an Operating Agreement:
- Can help to prevent disputes between members: An Operating Agreement can help to prevent disputes between members by clearly defining the rights and obligations of each member.
- Can help to attract investors: While a less-common concern, investors are often more likely to invest in an LLC that has an Operating Agreement in place. This is because an Operating Agreement shows that the LLC is well-organized and that its members are serious about their business. In fact, most banks and other organizations require a copy of your Operating Agreement before they’ll do any kind of business with you, even before they let you open an account with them!
- Can help to avoid litigation: An Operating Agreement can help to avoid litigation by providing a clear roadmap for how the LLC will be operated. This can help to prevent disputes from arising in the first place and how to resolve the disputes once they do arise.
Contact Ringel & Brymer, PLLC, to discuss your options for your Operating Agreement and learn how we can help you and your business with a well-drafted Operating Agreement.


