What should your company’s operating agreement include?

An operating agreement documents the policies and procedures of your business, typically used for a limited liability company. If a dispute arises within the company, this agreement will guide the resolution process.

Review the key elements to consider when creating an operating agreement for your new or growing business in Louisiana.

Ownership and profit

If you have an LLC with multiple owners (known as members), this section details the ownership percentage of each member. You should also indicate exactly how the business will distribute profits among its members, including the percentage you will reinvest in the company.

Roles and responsibilities

Whether the members have significant involvement in your business or you hire outside help to operate the firm, this section should clarify the roles and responsibilities of each manager. For example, maybe one member handles marketing and advertising, one member handles daily operations, and you hire an outside manager to handle finance and human resources. Include those details in the operating agreement.

Decision-making structure

Decide how your LLC will make important decisions. You may designate one member to have primary decision-making power or establish a voting structure. Indicate what types of decisions require a member vote and the majority percentage required.

This section should also detail the process for a member to leave the company. For example, you may want to require him or her to keep the shares within the LLC rather than selling to an outside investor.

While Louisiana does not require a new LLC to submit an operating agreement, having one in place can protect the significant time and money you have invested in your business endeavor.