An Operating Agreement is a contract with a very specific purpose: to lay
out the goals and expected future conduct of the parties in a joint venture.
Operating Agreements are typically used for LLCs but may be used in other
businesses or personal associations. Because Operating Agreements deal
with predicting future events and behavior, it is important to consider
many possible outcomes.
For example, in an LLC, it is frequently advisable to have provisions in
the Operating Agreement for the death or incapacity of a member or manager.
This can help provide for the smooth operation of the LLC even if something
happens to one of the members/managers involved in the LLC. Some LLCs
also arrange for life insurance policies that will purchase a member's
interest upon death so the LLC can retain control of itself and not be
subject to probate law or being transferred in the decedent's will.
Operating Agreements also provide organizational clarity. When the goals,
rules and expectations are set down for all to see, there are far fewer
surprises and all parties know what to expect. This makes for a more harmonious
business relationship as well as a more efficient business environment.
Like any other corporate document, an Operating Agreement needs to be reviewed
periodically to make sure that it still applies and can be adapted as
the organization grows. Along with addressing concerns that the organization
has, a lawyer can point out areas that may not have been considered and
prepare your organization for its bright future.
If you want to contact Owens and Perkins regarding an Operating Agreement,