I own my LLC with a partner (or partners). Are there any documents that govern our rights between one another?
Although many states do not require an LLC to have an operating agreement, it’s advised that all LLCs (even those owned by a single member) have one. Here are some of the most important things to include in an operating agreement:
- Percentage of Ownership: This will often be based upon the initial investments of the different members and can dictate how other rights are divided, but does not need to be.
- Distributions of Profit and Loss: This can most simply be based upon the different members’ percentage of ownership, but does not need to be. In more complicated scenarios, it might be a good idea to discuss this arrangement with a tax professional.
- Distributive Shares: Determine the distributive shares of each member. If this number does not correspond with the percentage of ownership, you will have to follow the rules for “special allocations.” (Found on page 26 of this document.)
- Members’ Specific Rights and Responsibilities: What role is assigned to each member.
- Rules for holding meeting and taking votes: Specific procedure(s) for how the LLC will make decisions.
In New York the Operating Agreement does not need to be filed with the state.
The foregoing is not intended to be, and should not be construed to be, tax advice. This website offers general answers to general questions based on information obtained from www.irs.gov and other publicly available information. Collaborative Fund cannot be held responsible for the results of any position taken on a tax return by any user of this site. Users should always obtain independent tax advice from a qualified tax professional to determine the tax consequences applicable to such user’s personal situation.
