Avoid Chaos With An Operating Agreement
Business owners who file an LLC on their own often miss key details by skipping an Operating Agreement, a mistake that can be avoided with professional guidance.
When a business owner decides to file their Limited Liability Company (LLC) on their own, creating a thorough Operating Agreement is the step that is most often overlooked. Often, many commonly omitted details can be avoided when you go through the process of forming your LLC with a professional.
The LLC Operating Agreement is an internal document outlining how the business operates. Once an LLC is created by filing the Articles of Organization with the Secretary of State, your LLC Operating Agreement should be created. It isn’t filed with the Secretary of State or any other government agency. However, each business entity must create and maintain this important document themselves.
Related Post: Five Common Misconceptions About Missouri LLCs Explained
If you own a single-member LLC, you might assume you don’t need a formal Operating Agreement. However, to protect your limited liability status, you must be able to demonstrate that your LLC is a separate entity from your personal finances.
A written agreement helps establish that separation by documenting ownership, business operations, and management responsibilities. This becomes especially important if your business is ever involved in a lawsuit or dispute with creditors.
An LLC Operating Agreement is one of the most important documents your business can have when there are multiple business owners. It outlines what happens when disputes arise between members, how ownership interests can be transferred, who manages the company, and what steps are taken if a member becomes bankrupt, incapacitated, or dies. Without a written agreement, Missouri LLCs may be subject to default state laws that may not fit your business needs.
By having an Operating Agreement signed by all members, you create a legally binding framework that prevents unnecessary conflict, conserves resources, and minimizes business disruptions.
Many business owners draft an Operating Agreement but fail to update it as the company grows. Life changes, new members join, existing members leave, or unexpected personal situations such as divorce, death, or bankruptcy occur.
If your Operating Agreement doesn’t reflect your business’s current reality, you may face legal and financial complications. For example, without an updated agreement, ownership interests may end up in probate if a member dies, creating uncertainty and disputes among heirs or business partners.
Best practice: review your Operating Agreement regularly with an experienced Missouri business attorney to ensure it is still serving your company’s goals.
While an Operating Agreement governs how your LLC functions day-to-day, a Buy-Sell Agreement acts as a “business will.” It answers the question: What happens to an owner’s share of the business if they leave, retire, divorce, become incapacitated, or pass away?
A Buy-Sell Agreement is a legally binding contract among business owners that spells out how ownership interests will be valued, purchased, or transferred if certain triggering events occur. It ensures a clear, predictable process so the business can continue running smoothly without disputes over ownership or valuation.
Prevents disputes – Without a written plan, family members or outsiders could inherit or claim ownership, causing conflict with remaining owners.
Protects business continuity – Establishes a process to keep the company running smoothly during transitions.
Clarifies valuation – Provides a fair method for determining the value of an ownership share.
Secures financing – Many banks and investors prefer businesses that have succession planning in place.
Gives peace of mind – Owners know their hard work will be protected, and heirs know what to expect.
At Assertion Law Firm LLC, we have extensive experience helping Missouri business owners protect their companies. We draft and review Operating Agreements, Buy-Sell Agreements, and other essential business contracts to ensure you are legally protected today and prepared for the future.
Your business deserves more than a “one-size-fits-all” template. Let us help you put the right agreements in place so you can focus on growth with confidence.
Contact us today at (888) 887-4170 to schedule a consultation and learn how we can safeguard your LLC and prepare your business for every stage of success.
Business owners who file an LLC on their own often miss key details by skipping an Operating Agreement, a mistake that can be avoided with professional guidance.
