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"Operating Agreement" for your LLC

eGrizzly

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Oct 27, 2017
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So after having formed an LLC business entity for 3 months now I went to a local SBA sponsored SB workshop.

There the business instructor was putting fear into people saying that after you've gotten confirmation from the state that your LLC has been formed that well....it still has not been formed all the way.

The SBA instructor says their's this thing called an "Operating Agreement" that you have to document with the state as well, and that without that, the LLC you created does not mean jack squat even if its a Single-member LLC!!

Ok then, that hit me by surprise so best thing I thought to do was to get some comments, discussions, thoughts, e.t.c. What has been your experience with this so-called "Operating Agreement" that is so crucial.
 
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Kruiser

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The SBA instructor says their's this thing called an "Operating Agreement" that you have to document with the state as well, and that without that, the LLC you created does not mean jack squat even if its a Single-member LLC!!

Frankly, that doesn't sound right. In the states where I have practiced law, having an operating agreement is a good idea if there is more than one member, but isn't strictly necessary. However, they do things differently in Texas. The laws that govern LLCs are state laws and are different in every state. Perhaps Texas has a requirement that even a single member LLC needs an operating agreement. My guess is that a) the SBA instructor doesn't know what he/she is talking about or b) the SBA requires that any LLC that gets an SBA loan must have an operating agreement and the instructor misunderstood that.

Anyway, I don't represent you, so have your own attorney look into this for you. At the least, fire up the Google and see what "Texas LLC operating agreement requirements" turns up.
 

CareCPA

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Did the instructor happen to be a lawyer who could conveniently write up an operating agreement for you? For just a small charge of course...
 

DrkSide

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Let me preface this with I am not, or ever have been a lawyer. Didn't even stay in a Holiday Inn Express last night.

As far as I am aware the state/government doesn't need or want your Operating Agreement. You need one to give to banks, lenders, and other people that may deal with your company. This tells them who is responsible for and can take on debt, what the structure is, and what happens should anything go wrong.
 
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CareCPA

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Entity formation is a state activity, so it is possible that in some states you would need to record your Operating Agreement with the state. I've never filled an entity in a state that required this, however.

Operating Agreements are incredibly important if you have other partners. If you ever go to court with a partner, the first question is going to be "what does the Operating Agreement say about this?"

For a single-member LLC, it is substantially less significant, as you are, by definition, the only member.
 

eGrizzly

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Oct 27, 2017
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Did the instructor happen to be a lawyer who could conveniently write up an operating agreement for you? For just a small charge of course...

...if we're in la-la land Care then maybe yes. however, in reality, a lot of those SBA Small Business instructors are very poorly paid....so basically most of them are washed out people who have either lost all their money, or those that can't find better jobs b/c of one reason or another.
 

CDM

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So after having formed an LLC business entity for 3 months now I went to a local SBA sponsored SB workshop.

There the business instructor was putting fear into people saying that after you've gotten confirmation from the state that your LLC has been formed that well....it still has not been formed all the way.

The SBA instructor says their's this thing called an "Operating Agreement" that you have to document with the state as well, and that without that, the LLC you created does not mean jack squat even if its a Single-member LLC!!

Ok then, that hit me by surprise so best thing I thought to do was to get some comments, discussions, thoughts, e.t.c. What has been your experience with this so-called "Operating Agreement" that is so crucial.

My day job is as a compliance officer for one of the nations largest broker dealers.

One of my tasks over the years was approving the opening of new accts, including business accounts.

No Op Agreement = no account.

Please note that this is not a comment on the legality of the business structure. I just need the op agreement so that I know who has authority on the account.

Hope that’s helpful.
 
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