Once the name of a limited liability company is secured, the required paperwork is filed and all of the fees are paid, many Maryland small business owners believe their legal obligations are fulfilled. However, when starting a new business as an LLC, there is another requirement -- creating an operating agreement. Certain elements must be included in this agreement in order to maintain the LLC's legal status.
If there are multiple members, each member's ownership interest must be set forth in the agreement. After that, the rules and voting procedures for meetings need to be outlined, along with each member's voting rights. As far as the business is concerned, the rights and responsibilities assigned to each member also need to be included in the document.
It may not have been necessary to specify a business purpose in the paperwork, but the operating agreement needs to be more specific. A management plan needs to be detailed so each member's duties are clear and the plan for making the business a success does not take imagination to envision. Other details that need to be included will govern how profits and losses will be distributed to the members. Provisions should also be made in the event a member dies or wants to sell his or her interest.
Creating an operating agreement may seem like a tedious task, but it provides valuable information to which all of the LLC's members can refer when needed. The more details provided and the more issues covered in the agreement, the better off a new business will be in the event that something goes wrong. With clear responsibilities and expectations, things will go more smoothly as a Maryland business strives to grow and succeed.
Source: FindLaw, "Making LLC Operating Agreements", Accessed on Oct. 29, 2015