Experienced Business Formation Lawyer in Knoxville
Embarking on a new business venture is both exhilarating and incredibly involved. We’ll help you protect your interests so your business can grow and prosper.
One of the more exciting moments in life is when you make the decision to go out on your own and start a business. It’s exhilarating—but also incredibly involved when you do it the right way.
When embarking on a new business venture, many individuals will make use of an online service that assists with forming their LLC or S-Corp and generates important documents for their business. One of the more important documents you will receive is the Operating Agreement for an LLC or the corporate bylaws for an S-Corp. However, these easily-generated documents will often contain very general language that is not specific to your business venture and will contain the minimum protections required by your state. In short, the documents you receive as part of the “package” you ordered will do very little to protect you or your company as your business venture grows; therefore, it pays to do things the right way the first time.
LLC Operating Agreements:
An operating agreement is a key document used by LLCs because it outlines the business’ financial and functional decisions including rules, regulations and specific provisions. The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owner(s). Once the document is signed by the member(s) of the limited liability company, it acts as an official contract binding them to its terms.
Why do you need a customized operating agreement?
1. To protect your business’ limited liability status: Operating agreements give members protection from personal liability to the LLC. Without this specific formality, your LLC can closely resemble a sole proprietorship or partnership, which can jeopardize your personal liability.
2. To clarify verbal agreements: Even if members have orally agreed to certain terms, misunderstanding or miscommunication can take place. It is always best to have the operational conditions and other business arrangements handled in writing so they can be referred to in the event of any conflict.
3. To protect your agreement in the eyes of your state: State default rules govern LLCs without an official operating agreement. This means that each state outlines default rules that apply to businesses that do not sign operating agreements. Because the state default rules are so general, it is not advisable to rely on the government to manage your agreement.
4. To protect the interests and position of the founding member of a single-member LLC should they later decide to bring in additional members and/or employees.Simply put, operating agreements are contract documents that address the functionality of the LLC’s internal affairs including but not limited to:
S-Corps and Corporate Bylaws:
Not all states require corporate bylaws, but they are always a good idea when setting up a new S-corp. This legal document lays out the company’s operational procedures and, when well-written, can limit disputes between shareholders and outline clear and efficient procedures for day-to-day activities. Said bylaws also give guidance on how to amend bylaws, and articles of incorporation, and advise on things that cannot be amended.
A company’s bylaws should include:
· Additional provisions specific to your business venture
Contact our office to schedule a free consult with one of our business formation attorneys. We can help you decide which business entity will provide you with the most protection and convenience, then ensure you have an ironclad operating agreement or comprehensive corporate bylaws to protect you and your business.