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One of the advantages of forming an LLC, especially if you are a solo entrepreneur, freelancer, consultant or otherwise in business for yourself without any co-owners or partners, is that it's a flexible choice of business entity. The LLC has minimal requirements for business filings and regulatory compliance. Unlike a C Corporation where you have to hold an annual shareholders meeting and deal with other regulatory paperwork, you typically do not need many business filings when you create a single-member LLC.
However, even if you own a single-member LLC, there is one type of legal document that you might want to create for your business: an Operating Agreement.
Learn more about how an Operating Agreement for a single-member LLC can help protect your business and personal finances.
Not every business is going to be “big.” Many entrepreneurs decide to form a single-member LLC so they can do business in an “official” and legally protected way, but without having to hire employees or deal with the regulatory paperwork and business filings of a larger business. Even if you are in business for yourself as a single person, such as a freelancer, consultant, professional services provider or any other business where it’s “just you” with no employees or business partners, you can set up a single-member LLC to give your business a legal identity that is separate from your personal finances.
An Operating Agreement is a legal document for an LLC that lays out certain key provisions and aspects of running the business. Especially if there are multiple owners or members of an LLC, the Operating Agreement specifies who owns what percentage of equity in the business, what happens in case of disagreements between the owners and other matters.
But even if you have a single-member LLC Operating Agreement, you can still use this document to clarify and formalize certain key elements of your business operations, such as:
Different business owners will want to do different things with their Operating Agreement. This is a flexible, adaptable business document that can be written in a lot of different ways, depending on what legal protections or specifications you want to create in the Operating Agreement.
Included with Out Standard & Premium Packages.
Order TodayIf you own a single-member LLC, an Operating Agreement is not required. However, you might want to create one to give yourself some additional protections and clarifications about how your business is managed, how your business succession plan might work in case of your premature death or disability and other issues.
Here are a few reasons why an Operating Agreement can help you with your single-member LLC:
When you form an LLC and start your business with Bizee, our Standard and Premium packages include an Operating Agreement. If you choose our Standard package, an Operating Agreement template can be added on for an additional fee. You will receive an Operating Agreement that includes the most commonly used provisions and also customized information based on your specific business needs, which is based on the information you give us while placing your order.
You can write your LLC's Operating Agreement on your own as well, but if you have concerns or specific complexities for your business, you might want to consult with an attorney in your state who can help write or amend your Operating Agreement to make sure it complies with state law and gives you the most protection.
Forming an LLC is a crucial step to make your business “official” in the eyes of the law and the banking system. Creating an Operating Agreement, even for a single-member LLC, can give you some additional clarity and protection. The Operating Agreement will define how you want to run your business, how your business profits and ownership equity are managed, how your business liabilities are kept separate from your personal finances and more. If your business owns significant physical assets or you want to create an orderly succession plan to pass down the business to your heirs and loved ones, don’t skip the Operating Agreement for your single-member LLC.
Ben Gran
Ben Gran is a freelance writer from Des Moines, Iowa. Ben has written for Fortune 500 companies, the Governor of Iowa (who now serves as U.S. Secretary of Agriculture), the U.S. Secretary of the Navy, and many corporate clients. He writes about entrepreneurship, technology, food and other areas of great personal interest.
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