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LLC Operating Agreement – The Heart Of Your LLC
The LLC Operating Agreement is the heart of your LLC’s tax potential and asset protection plan. Whether you’ve already got an LLC or you’re just setting one up, this site is for you. Follow all the steps and pay special attention to the sample template.
Forming an LLC
Forming an LLC is easy. Just follow the easy steps. If you’ve already got an LLC, make sure you’ve completed all the steps and see where you need to beef up your tax, money making and asset protection plans Here are the steps.
1. Fill out the Articles of Organization and file them with the state of your choice
2. Get your tax ID number and start to file the papers (if necessary) to choose your tax status
3. Design your Operating Agreement for maximum convenience, tax advantages, and asset protection
( Only pick two of the following: limited liability, continuity of life, transferability, centralized management.)
4. Integrate your LLC ownership with your estate plan (living revocable trust)
5. Issue membership shares, establish bank accounts, start business
Articles of Organization
You’ve got to file “articles of organization” with the state in order to form a limited liability company (LLC). Just use the articles of organization template on your state’s website. Don’t get sucked into filing in Nevada, Delaware, or any state unless you live there or doing business in the state. You’ve got to have a very good reason to file in a “foreign” state. States basically all have the same asset protection and privacy laws.
The articles of organization are standard forms. They are filed with the state, and they are public documents. The state templates have the minimum amount of information the state needs to register your LLC. Just fill out the state forms. Don’t elaborate and give the state any more information than they require. You don’t want any more information out there in the public than you have to have.
There are a bunch of websites that offer free LLC articles of organization. They are just using the state’s forms.
An LLC Operating Agreement is a “Pick Two” Proposition
You can think of an LLC as a defective corporation. There are four elements to a corporation: Limited Liability, Continuity of Life, Transferability of Ownership Interests, and Centralized Management. In an LLC, you have to pick two, and you can only pick two. Pick more than two or less than two and you lose.
Your “pick two” choice is made in your LLC operating agreement. I have seen LLC operating agreement templates where all four are “picked,” because they all sound good. in the LLC operating agreement template. By definition, you don’t have an LLC, and it isn’t going to protect you, because you didn’t properly fill out the operating agreement for LLC template choices.
Single Member vs Multi-Member
A single member LLC operating agreement is not the same as a multi-member LLC operating agreement. You need to take special care in drafting your single member LLC operating agreement, because single member LLCs are under attack.
For example, Florida’s Supreme Court “set aside” a critical part of a single member LLC’s asset protection and let the creditors of the LLC’s owner (single member) come directly against the assets of the LLC. (See SHAUN OLMSTEAD, et al., vs. FEDERAL TRADE COMMISSION, [June 24, 2010])
You can “beef up” your LLC operating agreement, and it will make your asset protection a lot more effective. In fact, if you are already in trouble, you can hurry and beef up your LLC operating agreement. Beefing up your operating agreement certainly doesn’t violate any laws. You need a review ASAP by someone who really knows LLC operating agreements inside and out.
Taxing Your LLC
Your LLC can be taxed any way you choose. You just tell the IRS what you want. The LLC operating agreement should have provisions it that take advantage of the tax choice you make. You’ve got to understand that the taxation of an LLC and the asset protection of an LLC have nothing to do with each other. An LLC is an LLC is an LLC. It doesn’t matter how it is taxed, the legal structure is the same and asset protection are the same.
If you choose to have your LLC taxed as a partnership, you don’t have an LLC partnership agreement. Lots of people say they have and limited liability partnership or a limited liability corporation. No, it is a limited liability company taxed as a partnership or a corporation.
You LLC can be what the IRS terms a “disregarded” entity. That means the IRS ignores the LLC for tax purposes. You will file your 1040 taxes just like you always have, along with a schedule C for your business activities.
However you set up your LLC as a taxing entity, the guts of the LLC are its LLC operating agreement. Don’t treat this piece of paper casually and just take any LLC operating agreement template. What you write down makes a difference.
LLC Operating Agreement Template
Your LLC operating agreement really is the heart of your company. An attorney may just treat it as a form document — same size fits all, but it really is important. It needs to address lots of issues. I’ve seen lots of 100 page operating agreements. That’s an overkill for most people, but the words on the paper mean a lot when the IRS and the lawyers come gunning for you. The words will determine your financial life in many cases. Do it right to start with!
The state has Articles of Organization forms you SHOULD use, BUT your state isn’t going to give you an LLC Operating Agreement template. The articles of organization forms are free on every state’s site; be aware that some other sites lift them as bait to get you in and sell you an (often inferior) operating agreement. All of the other “free” operating agreements I have seen on the internet are a few pages long and don’t address many of the issues that need to be addressed in an operating agreement to give you the huge asset protection and tax advantages an LLC has to offer. The one I have for you is about 20 pages long and addresses most of the major issues.
The operating agreement is the “meat,” the “heart” of your LLC. You need a good operating agreement. It controls what happens when creditors come after you, what happens when you die, whether or not you have any liability shielding, what benefits you get, and dozens of other issues surrounding your LLC.
Do you really want the run-of-the-mill LLC operating agreement sample?
Spend 90 minutes going through the easily customizable version of our Operating Agreement Template with my audio instructions so I can show you what you need to do to get the most protection and the best savings from your LLC.
Let me walk you through
- Customizing Your Operating Agreement
- Protecting Business Assets From Personal Liabilities
- Having a Smooth Ownership Transition
- Eliminating Estate Taxes
- Reducing Payroll Taxes (self employment taxes)
- Cutting Your Income Taxes by $20,000 – $30,000
- Using your LLC to Make Money and Protect Your Assets.
Get the Complete LLC Operating Agreement
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Get the Complete LLC Operating Agreement and Go Way Beyond the Standard Templates
by Lee Phillips