What is a Limited Liability Company Operating Agreement?
Washington statute allows the members of a limited liability company to enter into an agreement regarding how the company will be governed, so long as the agreement is not in conflict with Washington statute. See RCW 25.15.050.
The operating agreement of a limited liability company provides the rules that the business must follow. The agreement can address issues such as: the purpose of the business, the members of the business, capital contributions, allocation of profits and losses, liquidation and dissolution of the company, management of the company, member meetings and voting, transfer of ownership in the company, and company record keeping. In the absence of an operating agreement, a limited liability company is governed by the default provisions in the limited liability company statute, RCW 25.15, et. seq.
Each limited liability company is different. While default rules provided in the limited liability company statute may be appropriate for some businesses, other businesses may benefit from a more personalized operating agreement. For example, the members of a limited liability company may desire a very specific formula to calculate the value of member ownership interests upon sale or transfer. An operating agreement can provide an agreed-upon, specific formula tailored to the business. Likewise, closely-held limited liability companies may want to restrict the transferability of membership interests to maintain continuity of management. An operating agreement can provide detailed rules restricting the transfer of membership interests to facilitate this purpose.
In short, a limited liability company operating agreement takes the “guess work” out of business governance. If you are considering forming a limited liability company or have questions regarding an existing company, a Spokane business attorney can help. Wolff, Hislop & Crockett prides itself on being a trusted legal resource for businesses in the Spokane, Spokane Valley, and Liberty Lake areas and beyond. Contact us today for a consultation.