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This document provides clarity, helps avoid misunderstandings, and shows that you are running a serious business. Read on to learn about how you can draft your own Missouri Operating Agreement.
An Operating Agreement is a legal document, an agreement between members covering the conduct of the business, the affairs of the LLC, and the rights, duties, and obligations of all members and managers. It covers things such as:
When starting an LLC in Missouri, Missouri law requires you to “adopt an Operating Agreement containing such provisions as such member or members may deem appropriate, subject only to the provisions of sections 347.010 to 347.187 and other law.”
As a key formation document, it is a good idea to take care of drafting your Operating Agreement at the same time as your Articles of Organization.
According to Missouri’s Secretary of State Small Business Startup Guide, the Operating Agreement is an LLC’s internal document (not filed with the Secretary of State or any other government agency) that “establishes the rules and regulations for the conduct of the company’s business and affairs, and the rights, powers, and duties of the company’s members, managers and employees.”
While an Operating Agreement is a legal requirement in Missouri, there are other business benefits. The U.S. Small Business Administration (SBA) recommends that every LLC owner have an Operating Agreement before opening their business doors. Drafting a Missouri LLC Operating Agreement during the LLC formation process can help you by:
What’s included in a Missouri Operating Agreement will vary from business to business and according to the type of LLC you are — single-member, member-managed, or manager-managed. That said, here are some commonly recommend items to include in an Operating Agreement:
You would specify the company name as it appears on your Missouri Articles of Organization, filed with the state. So, it must be the full LLC name and not an abbreviation or nickname. It must also include the words or acceptable variations of “Limited Liability Company” (such as “LLC,” “L.L.C.,” “L.C.,” or “LC”).
When it comes to your business structure, specify whether you are a single-member LLC or a multi-member LLC run by members or managers. You should specify who the members or managers are, and it’s a good idea to include the parameters of their authority. Managers do not have to be members of the company. They can be someone hired from outside the LLC membership.
On top of providing the full names of the members (owners), you need to give a breakdown of the percentage of each member’s ownership or membership interest. This can be calculated in different ways. One way is by the size of a member’s capital investment. For example, if they invested half of the total, they would get 50% ownership of the LLC.
You can designate the precise services that members and managers are expected to perform in running the business and say if they will receive additional compensation for these duties.
Whether your LLC is managed by members or manager(s), you need to specify how voting will be handled, including who is allowed to vote on which issues.
Typically it is one person, one vote, but in some businesses, certain members are given greater voting rights. For example, you could decide to give a partner voting rights proportional to the size of their capital investment in the LLC.
You would specify here how profits are distributed among members. Typically, this would be done evenly or according to ownership percentage. It is important to be clear about these distributions because money has the potential to become a big point of contention in an LLC.
An LLC isn’t legally obliged to hold shareholder or similar meetings, as corporations are. Still, it’s a good idea to have regular meetings of members and managers to talk about business affairs. Establish this as a necessary precedent by including what type of meetings you want to have, who should attend, and how often they should be held.
It’s essential that you lay out the process for buying out and/or replacing a member in the LLC’s Operating Agreement. How will roles and ownership be transferred if a member leaves the company? What happens to a leaving member’s ownership percentage? And what is required to bring a new member in? The Operating Agreement will probably need to be modified if these things happen, so steps should be included to make amendments.
What happens to a member’s interest upon death? It’s possible to stipulate that the remaining members purchase the interest, allow certain persons (such as a spouse or child) to acquire the interest, or give remaining members the right of first refusal before transferring the interest to an heir.
If members don’t want to continue running the business, they can decide to dissolve it. You would list the conditions and procedures for dissolution here.
If you are a single-member LLC, you might think that not many of the above points apply to you, such as voting rights, since there is only one of you. However, these things need to be spelled out for legal reasons.
For example, you might need to include a clause in your Operating Agreement specifying that you are the sole owner, with 100% ownership rights, and that you have the full authority to act on behalf of the LLC without conducting votes or holding meetings.
You’ve probably seen this boilerplate legal clause in other contracts. In essence, it states that if one part of the Operating Agreement becomes invalid, that does not invalidate the other parts. This may stop one small error in your Operating Agreement from rendering the entire document meaningless.
An Operating Agreement is an important document and can be complex, so it is often a good idea to get advice from a business lawyer when drafting it.
You can also turn to the resources of ZenBusiness for help, utilizing our Operating Agreement template. With it, you can outline the rules and plans that govern your LLC and provide the structure and framework needed to grow your business.
A Missouri LLC Operating Agreement is an important document for your business, and it should be a dynamic and flexible one, changing and evolving as your company does. Members may change, financial issues could crop up, or your business focus could shift elsewhere. Other changes could include capital contributions, the timing of profit distributions, percentage allocation of profits, or your registered agent and/or registered office.
These changes need to be reflected in the Operating Agreement so that it is a valid guide if a legal dispute crops up. An up-to-date Missouri Operating Agreement will also help keep your LLC legally compliant with state and federal business laws.
You should, at the very least, review the Operating Agreement every year to make sure it still holds true in all its parts. If it requires amendment, follow the procedure you have outlined in the Operating Agreement. If you have specified that a vote has to be taken, take the vote, put the changes in writing, and, if needed, get the members to sign off on the amendment.
Also, keep in mind that some amendments to the Operating Agreement might also have to be reflected in an amendment to your Articles of Organization filed with the Missouri Secretary of State. These could include a change to your company’s name or business address. You can file an amendment to the Articles of Organization with a $25 filing fee.
Yes. Missouri state law requires LLCs to adopt an Operating Agreement “containing such provisions as such member or members may deem appropriate, subject only to the provisions of sections 347.010 to 347.187 and other law.”
A template from ZenBusiness can help you craft a Missouri Operating Agreement for your LLC. However, since every business is unique, it’s also a good idea to consult a business lawyer to make sure the agreement covers everything it should, in the right way.
Yes, you do. It’s a legal requirement, just as it is for multi-member LLCs.
No, the Operating Agreement is an internal document for your LLC, kept on file at your primary business address and with your lawyer. It is not filed with the Secretary of State or another government agency.
Yes, you are permitted to do this, and there are plenty of templates to help you, including from ZenBusiness. However, it is a good idea to get a business lawyer to review this important legal document.
There is no legal requirement to have a lawyer create your Operating Agreement. But it just makes good business sense to get an attorney familiar with Missouri business laws to look over your Operating Agreement, perhaps drawing your attention to important issues not covered in existing templates.
They can also help you with provisions that provide indemnification to members who may become parties to litigation, arbitration, or investigations because of their service with the company.
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