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LLC Establishment Agreement: What You Need to Know
If you`re thinking of starting a business, you may have heard the term “LLC” thrown around. Limited Liability Companies (LLCs) have become increasingly popular among entrepreneurs because they offer a number of benefits, including protection of personal assets in the event of a lawsuit. However, before you can officially form an LLC, you`ll need to draft and sign an LLC establishment agreement.
What is an LLC Establishment Agreement?
An LLC establishment agreement is a legal document that outlines the ownership structure, management, and operation of a new LLC. It is also sometimes referred to as an operating agreement. Essentially, the agreement is a contract between the members of the LLC that governs how the business will be run.
What Should be Included in an LLC Establishment Agreement?
There are several key components that should be included in an LLC establishment agreement:
1. Company Information: The agreement should include the name of the LLC, the purpose of the business, and the address of the principal place of business.
2. Ownership: The agreement should outline the ownership structure of the LLC, including the names and addresses of all members and the percentage of ownership each member will have.
3. Management and Operation: The agreement should detail how the LLC will be managed and operated. For example, it should specify who will be responsible for day-to-day decision making and how major decisions will be made.
4. Capital Contributions: The agreement should outline how much money each member will contribute to the LLC and when those contributions will be made.
5. Profits and Losses: The agreement should specify how profits and losses will be distributed among the members of the LLC.
6. Dissolution: The agreement should include provisions for what will happen if the LLC is dissolved, including how assets will be distributed and how outstanding debts will be paid.
Why is an LLC Establishment Agreement Important?
An LLC establishment agreement is important because it sets out the expectations and responsibilities of each member of the LLC. By agreeing to the terms of the operating agreement, all members are on the same page about how the business will be run. In addition, having a legally binding agreement in place can help prevent disputes among members down the line.
How to Draft an LLC Establishment Agreement
While it is possible to draft an LLC establishment agreement yourself, it is generally recommended that you seek the help of an experienced attorney. An attorney can help ensure that the agreement is legally sound and includes all necessary provisions.
Once the agreement is drafted, all members of the LLC should review and sign it. The signed agreement should be kept in the company`s records, along with other important legal documents.
In conclusion, an LLC establishment agreement is a necessary part of forming a new LLC. It outlines the ownership structure, management, and operation of the business, and helps prevent disputes among members. While it is possible to draft the agreement yourself, it is recommended that you seek the help of an attorney to ensure that it is legally sound and includes all necessary provisions.