Operating agreement template?

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Hayden
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Operating agreement template?

Post by Hayden » Wed Nov 15, 2017 10:37 am

I have a two-member LLC taxed as an S Corp. I don't have an Operating Agreement (my state does not require one).

I am now applying for a government program that requires that I submit an Operating Agreement.

Are there any good templates online that I could use? Or am I being foolish and I should pay an attorney to draft one ?

Liberty1100
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Re: Operating agreement template?

Post by Liberty1100 » Wed Nov 15, 2017 10:44 am

I suggest start with a template you find online and discuss with your other partner. Once you agree, bring the marked up copy and ask a lawyer to review and make sure everything is covered. I don't think you should pay a lawyer until you have some basic discussions, especially if that partner is your significant other.

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Hayden
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Re: Operating agreement template?

Post by Hayden » Wed Nov 15, 2017 10:55 am

Liberty1100 wrote:
Wed Nov 15, 2017 10:44 am
I suggest start with a template you find online and discuss with your other partner. Once you agree, bring the marked up copy and ask a lawyer to review and make sure everything is covered. I don't think you should pay a lawyer until you have some basic discussions, especially if that partner is your significant other.
That's a good idea. What's confusing me is that we are an LLC taxed as an S Corp. I see LLC operating agreement templates, and S Corp templates. The LLC templates contain things that wouldn't be allowed for an S Corp.

Maybe use the LLC templates and insert a statement that the company will operate in accordance with S Corp rules as long as the S Corp election is in effect? Is that the way to handle this?

vaught
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Re: Operating agreement template?

Post by vaught » Wed Nov 15, 2017 1:03 pm

As much as you probably do not want to hear it, this is a time that consulting an attorney is likely necessary.

I understand that many Operating Agreements are standard. But if you get a provision wrong or a provision is included that you didn't know the effect of or is absent, it can have huge consequences.

Consider this a good time for you and your partner to draft an accurate Operating Agreement. Even if your state doesn't require one, any business with more than one principal should have an operating agreement. I'm surprised your bank didn't require one when opening up a business account.

In my practice, I've seen first hand the effect of a poorly drafted Operating Agreement.

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TinkerPDX
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Re: Operating agreement template?

Post by TinkerPDX » Wed Nov 15, 2017 1:06 pm

Hayden wrote:
Wed Nov 15, 2017 10:37 am
I have a two-member LLC taxed as an S Corp. I don't have an Operating Agreement (my state does not require one).

I am now applying for a government program that requires that I submit an Operating Agreement.

Are there any good templates online that I could use? Or am I being foolish and I should pay an attorney to draft one ?
Definitely worth consulting a lawyer. These things can have expensive consequences if not done well. But it doesn't have to be super-expensive.

If you tell a lawyer you want an ultra-simple 2-member LLC operating agreement, and ask for them to give you a list of questions they need answered, you can probably get this done for under $1,000 and likely $500, working with their own templates and standard language. (Of course, there are always unique circumstances once you go beyond a single-member entity.) Look for firms in your area that advertise start-up/entrepreneurial practice, as they often have flat fee policies for things like this.

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Hayden
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Re: Operating agreement template?

Post by Hayden » Thu Nov 16, 2017 5:06 pm

TinkerPDX wrote:
Wed Nov 15, 2017 1:06 pm
Hayden wrote:
Wed Nov 15, 2017 10:37 am
I have a two-member LLC taxed as an S Corp. I don't have an Operating Agreement (my state does not require one).

I am now applying for a government program that requires that I submit an Operating Agreement.

Are there any good templates online that I could use? Or am I being foolish and I should pay an attorney to draft one ?
Definitely worth consulting a lawyer. These things can have expensive consequences if not done well. But it doesn't have to be super-expensive.

If you tell a lawyer you want an ultra-simple 2-member LLC operating agreement, and ask for them to give you a list of questions they need answered, you can probably get this done for under $1,000 and likely $500, working with their own templates and standard language. (Of course, there are always unique circumstances once you go beyond a single-member entity.) Look for firms in your area that advertise start-up/entrepreneurial practice, as they often have flat fee policies for things like this.
I took your advice, contacted the local entrepreneurial group, got referred to a local lawyer who helps startups, and I have an appointment with him on Monday. Then I googled him. He's a recent graduate of a good law school who seems to be operating his own law practice. Should the fact that he's young and inexperienced concern me at all? Or is this something that doesn't require lots of experience?

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TinkerPDX
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Re: Operating agreement template?

Post by TinkerPDX » Sun Nov 19, 2017 11:33 am

Hayden wrote:
Thu Nov 16, 2017 5:06 pm
TinkerPDX wrote:
Wed Nov 15, 2017 1:06 pm
Hayden wrote:
Wed Nov 15, 2017 10:37 am
I have a two-member LLC taxed as an S Corp. I don't have an Operating Agreement (my state does not require one).

I am now applying for a government program that requires that I submit an Operating Agreement.

Are there any good templates online that I could use? Or am I being foolish and I should pay an attorney to draft one ?
Definitely worth consulting a lawyer. These things can have expensive consequences if not done well. But it doesn't have to be super-expensive.

If you tell a lawyer you want an ultra-simple 2-member LLC operating agreement, and ask for them to give you a list of questions they need answered, you can probably get this done for under $1,000 and likely $500, working with their own templates and standard language. (Of course, there are always unique circumstances once you go beyond a single-member entity.) Look for firms in your area that advertise start-up/entrepreneurial practice, as they often have flat fee policies for things like this.
I took your advice, contacted the local entrepreneurial group, got referred to a local lawyer who helps startups, and I have an appointment with him on Monday. Then I googled him. He's a recent graduate of a good law school who seems to be operating his own law practice. Should the fact that he's young and inexperienced concern me at all? Or is this something that doesn't require lots of experience?
How recent? I might be wary or look for someone else if s/he just passed the bar in 2017, but what you're doing is (at least probably) pretty simple. Who is the other member? If it's your spouse, for instance, than there is little to negotiate. If it's you and an arms-length business partner, it could be more important to have someone a little more experienced, IMO.

If you're two friends who are 50-50, consensus on everything (which all small 2-member LLCs seem to be...) the lawyer may try to push you into something where decisions are allocated to one or the other of you, which can get more complex. 50-50 is a recipe for deadlock.

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