LLCsOperating agreements

What is an operating agreement?

An LLC Operating Agreement is a legal document that outlines the duties, rights and ownership percentage of the all the members who own the LLC. All of the owners must sign this document. It usually sets forth the financial arrangement of the members, how profits and losses are distributed, who has management rights, and what kind of approval is needed for various decisions that the members can make on behalf of the LLC.

Why do I need an operating agreement? A bank, title company or other business usually asks for an operating agreement as part of their due diligence when doing business with an LLC. This is especially important when doing things that require identity verification, like selling a house. Without an operating agreement, the title company can’t properly verify who exactly is involved in an LLC or who has the right to make decisions. If two people are involved in an LLC and each one must approve the sale of a property, the presentation of the signed operating agreement would prevent one member from selling the property without the knowledge of the other member and pocketing the sale proceeds.

Why do I need an operating agreement if I am the sole owner of an LLC? There are many reasons why it’s wise to have an operating agreement as a single member LLC, as we discuss in this post. But for the purpose of the title company, it’s important to have a signed operating agreement on file because it provides proof to them that you are the sole owner of the LLC. Since real estate transactions are forever, it’s important to have written documentation of this, and simply telling them that you’re the only member on the phone won’t cut it for them.

Need an operating agreement fast? Call us today at 888-403-1259 and we’ll set you up.

One thought on “What is an operating agreement?

  1. Hello I am a new RE Investor. Looking to strengthen my LLC documents and also complete RE transaction at an honest, ethic, productive manner.

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