Operating Agreement
Definition
Operating Agreement: An operating agreement defines how an LLC is governed—including member ownership, profit distribution, voting rights, and management structure. Even single-member LLCs benefit from operating agreements to establish liability protection and outline procedures. It's the foundational document for LLC governance.
Example Usage
“Our operating agreement defines 60/40 ownership split, outlines how decisions get made, and specifies what happens if a founder leaves.”
Common Misconceptions
Related Terms
Shareholder Agreement
A shareholder agreement governs relationships between company shareholders—covering voting rights, transfer restrictions, drag-along/tag-along rights,...
Bylaws
Bylaws are the internal rules governing how a corporation operates—including board structure, officer roles, meeting procedures, voting requirements,...
Cap Table
A capitalization table (cap table) is a spreadsheet or database showing the equity ownership of a company, including shares held by founders, employee...
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