When forming an LLC, one of the most crucial documents you’ll need to create is your operating agreement. It’s the foundation that outlines the roles, responsibilities, and financial structure of your LLC. But a common question we often hear at Business Formation Education, LLC (BFE) is: “Does an operating agreement need to be notarized?”
Here’s the straightforward answer: No, it does not need to be notarized. Although it’s a legal document, there’s no requirement for it to be officially witnessed or notarized. This simplifies the process, allowing you to focus on getting your business up and running without unnecessary hurdles.
That said, if you want to add an extra layer of formality to the document, you can certainly choose to have it notarized for a standard fee. However, rest assured, notarization is not a necessity.
What Exactly is an Operating Agreement?
An operating agreement is more than just paperwork—it’s the backbone of your LLC. It clearly lays out the financial agreements and roles of each member within your company. While some states mandate having an operating agreement by law, even in states where it’s not required, it’s highly recommended.
An operating agreement typically includes the following key sections:
- Organization: Details like the date of creation and the ownership structure of your LLC.
- Management and Voting: Clarifies whether the LLC is member-managed or manager-managed, and how voting rights are distributed.
- Capital Contributions: Outlines any initial monetary contributions made by members.
- Distributions: Explains how profits, losses, and assets will be shared among members.
- Membership Changes: Provides guidelines on adding or removing members, and what happens if a member exits or passes away.
- Dissolution: Details the process for dissolving the company, if necessary.
Unlike the articles of organization, your operating agreement remains confidential and does not need to be filed with the state.
Why Have an Operating Agreement?
Even if it’s not legally required in your state, having an operating agreement is a wise move. It sets clear expectations for how the business will operate, helps prevent potential disputes, and provides a solid foundation for your LLC’s legal standing.
Having a formal agreement in place also strengthens your LLC’s limited liability status. Without one, you risk the possibility that a court might hold members personally liable, potentially exposing their personal assets.
Think of your operating agreement as a safeguard, protecting your business from internal disagreements and ensuring that everyone is on the same page from the start.
Crafting a Solid Operating Agreement
Given its importance, it’s essential that your operating agreement is well-thought-out and comprehensive. Every member of the LLC and the manager(s) should sign the operating agreement on separate signature pages.
Creating a quality operating agreement involves more than just filling in the blanks—it’s about tailoring the document to suit your specific business needs. That’s where having a knowledgeable lawyer on your side can make all the difference.
At BFE, we partner with LegalShield to offer affordable access to experienced small business lawyers. For as little as $2 a day, you can get the legal advice you need to draft an operating agreement that truly protects your business.
The Importance of a Strong Operating Agreement
Here’s why a solid operating agreement is indispensable:
- It Protects Your Limited Liability Status: This is crucial in maintaining the separation between your personal and business assets.
- It Prevents Disputes: A well-crafted agreement serves as a reference point for resolving conflicts, helping to avoid costly legal battles down the road.
- It Provides Flexibility: Without an operating agreement, your LLC could be subject to default state laws that may not align with your business goals.
At BFE, we’re here to help you navigate the complexities of forming and managing your LLC. By ensuring you have a strong operating agreement in place, we help you build a solid foundation for your business’s success.