Instead of opening your doors to potential legal and operational problems, it’s much better to make sure you have an operating agreement for your business, even if it’s just a two-person organization.
If you’re unfamiliar with the term “operating agreement,” don’t worry — it’s fairly straightforward to understand.
Operating agreements are documents that give insight into your business’s rules, finances and provisions. All the internal workings of your company are outlined in the operating agreement. After your operating agreement has been written, it should be signed by everyone who is an LLC member. This binds you and your operational teammates, and indicates you’re on the same page about the way your small business will be run.
Although you might assume that an operating agreement is just a formality, it’s actually a document that will protect you from serious issues. Some of the benefits of having an operating agreement in place include:
Over time, it may be necessary to change your operating agreement by striking out clauses, changing wording or making other modifications or deletions. For instance, if your operating agreement talks about the responsibilities of managers, and your industry is hit with new laws or rules, you may have to update those responsibilities.
A good example of this was when the HIPAA guidelines changed parameters for many supervisors and front-facing personnel in the healthcare marketplace.
Obviously, any alterations to the operating agreement require the acceptance of all applicable personnel.
Still not sure if an operating agreement is needed at your small business? Consult a professional. It’s much better to have one in most cases than to leave yourself open to pitfalls that might have been avoided.