Does My LLC Need An Operating Agreement?

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Does My LLC Need An Operating Agreement?

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Question: I want to form an Arizona LLC.  I know I need to file articles of organization with the Arizona Corporation Commission, but do I need an operating agreement too?  What if I am going to be the only member of the LLC?

Answer:  Every LLC should have an operating agreement. An operating agreement is one of the most important documents for LLC owners because it governs the LLC’s financial and operational structure.  Similar to bylaws of a corporation, an operating agreement governs the internal operations of the business, and sets forth the members’ rights, duties and obligations when it comes to the LLC.

One of the most important reasons to create an operating agreement is to protect the business’ limited liability status.  An operating agreement is one very good example that the entity exists separate from its owners, thereby protecting the assets of the individual members.  If an entity has a difficult time demonstrating that it is in fact operated separately from its owners, creditors may be able to “pierce the corporate veil” and reach the assets of the individual members to satisfy the LLC’s debts.  Operating agreements are even more important for single member LLCs so that the owner can demonstrate that the LLC is operated entirely separate from the owner him or herself.

Protecting the assets of the members is just one reason why operating agreements are important.  Learn more about Why Every LLC Needs An Operating Agreement.


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