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What are reasons why my single-member LLC would need an operating agreement?

Forming a limited liability company – also known as an LLC – is the process of taking your freelance business and turning it into a legal entity. It will provide you with tax benefits and personal liability if anything were to happen to your company.

An operating agreement is a contract between LLC members similar to a partnership agreement or a shareholder’s agreement. It shows the structure of the organization. It sets out the members’ duties, rights, and responsibilities in the operations and finances of the LLC.

Even as a single-member LLC, having an operating agreement is strongly advised. Below are a few reasons why you should consider an operating agreement:

    • You are able to protect yourself as the owner from personal liability from business activities.
    • Having an operating agreement and keeping records of operations helps establish the separation of the business from the owner. Without an operating agreement, you will find it is more difficult to show that you and your business are separate entities.
    • If an LLC has no operating agreement, it can be subject to the default rules of the state in which the LLC is organized. Letting the state tell you how to dispose of your business assets is not what you want for your LLC, so your operating agreement needs to be specific to your situation.

There is no legal requirement to hire an attorney to form an LLC; however hiring one can save you time and money because they can handle items you may not have time to consider. Most states do also allow business owners to form an LLC on their own or with the help of an incorporation service if not from an attorney. Here at DAL Law Firm, we assist with forming LLC’s and we can help you get started on it today. You can reach us at (206) 408-8158 by phone or text. We look forward to hearing from you.

DAL Law Firm: Why would my single-member LLC need an operating agreement? 1

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