Forming the LLC is Just the Beginning
There are virtually hundreds of services available to help individuals form an LLC. For those who have used one of these services and subsequently suffered legal problems or misunderstandings and disagreements among co-members, the agonizing reality becomes clear that forming the LLC is just the beginning.
Submitting the proper documents in the correct form to have your LLC recognized by the state is the easiest part in forming and operating an LLC. People generally form an LLC for two reasons. 1) First, they want to ensure liability protections for themselves personally and business liability protections for their business. 2) The second reason people generally form an LLC is to choose from the different tax structures available to an LLC. The LLC falls under the IRS’s “check the box” tax regulations.
When you use a use a document preparation service to form your LLC, however, both purposes are extremely under served. Submitting the Articles of Organiztion to a state’s filing agency is a very simple task in reality. All states require a fairly minimal amount of information to be submitted to the Secretary of State (or other filing agency) in order to form an LLC. All but a few states provide a template set of Articles of Organization. Once stamped as filed the LLC is active. This initial activation of the LLC creates only the possibility to qualify for all of the statutorial protections available however. To truly qualify for the protections inteded for the LLC, the LLC must be run correctly. An LLC operating agreement is the user guide and strategic plan to help business owners properly operate their LLC. The dangers of an inaccurate, under-encompassing, or inapplicable operating agreement cannot be understated.
The LLC Operating Agreement Must Be a Guide To Effective Operation
To manage an LLC effectively, the owners of an LLC must have a plan (or legal proposal) that declares the LLCs operating structure, and a manual (descriptive course of conduct) to help the LLC members and managers effectuate that plan. 
The operating agreement serves both purposes. Unlike the Articles of Organization, the LLC operating agreementis an “internal document” and is not filed with the state. For all potential issues the LLC and its members could potentially face, the operating agreement should contain an identification and explanation of the issue, a declaration of policy concerning each issue, and course of action to address the issue. Each state’s LLC act identifies many such issues, and attorneys familiar with forming LLCs are generally familiar with additional issues not discussed in the LLC act. The Limited Liability Company Operating Agreement Part 2; Agreement Construction will address how the operating agreement must reflect these issues. The members and managers of the LLC should have a basic understanding of the operating agreement sections, and the issues they address.
Why It Really Matters
In essence, if the LLC is ever in question before a court, the judge will first read the operating agreement and determine whether or not the members and managers performed the LLC business operations according to it. On issues the LLC operating agreement does not address, the judge will look to the statute to determine what the state’s default law on the subject is. Often times, if it is not in the operating agreement or LLC Act (the state’s LLC statute), a judge will determine it to be an issue that may not be addressed by the court.
How STARTright Factors In
It is essential that you both have, and understand your LLCs operating agreement. The operating agreement must be editable, because situations in your business change, and the law in state’s often change. Many attorneys do an excellent job of drafting effective operating agreements. This will usually be expensive however. STARTright is geared around providing a usable, and editable operating agreement that may mold and change to fit your businesses needs. The images in this blog post are taken from the performance support videos in the LLC set up wizard that help better explain operating agreements and other LLC aspects. I will be writing two more blog posts about operating agreements to fully explain this concept, and how STARTright factors in.
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As a business law attorney and founder of STARTright, Spencer Rose is the driving force behind STARTright, and the voice behind STARTright Talk. A graduate of Boston University School of Law, Spencer developed STARTright to help entrepreneurs navigate the waters of starting a new business, especially the legal and tax aspects. "Talk is my opportunity to write about all kinds of aspects affecting entrepreneurship and business building." 
