According to an experienced Orange County business attorney Tawny Mazarei, an operating agreement is a legal document that outlines the structure and operating procedures of a limited liability company (LLC). It is a crucial document for LLCs and serves as an internal governing document that establishes the rights, responsibilities, and relationships among the members (owners) of the company.

Key components typically included in an operating agreement are:

• Ownership Structure: Details about the ownership interests of each member, their contributions to the company, and their share of profits and losses.
• Management Structure: Specifies how the company will be managed, either by its members (member-managed) or by appointed managers (manager-managed).
• Roles and Responsibilities: Defines the roles, responsibilities, and decision-making authority of each member or manager.
• Distribution of Profits and Losses: Describes how profits and losses will be allocated among members.
• Transfer of Membership Interests: Outlines the process and restrictions for transferring ownership interests in the company.
• Dissolution: Specifies the procedures to be followed if the company is dissolved or if a member leaves.

Having a well-drafted operating agreement is crucial for the smooth operation of an LLC. It helps prevent misunderstandings among members, provides a clear framework for decision-making, and establishes guidelines for addressing various situations that may arise during the life of the business. It’s important to note that while an operating agreement is not always legally required in every jurisdiction, it is highly recommended for the protection and stability of the LLC.

Please feel free to contact our law firm – (714) 418-5797 – to inquire about forming California LLC and the utilization of various forms needed to operate your business.