The agreement can be updated as necessary as a source of guidelines both for normal operations and for helping resolve any disputes that may arise. Most LLCs won’t need to file or provide proof of an operating agreement-in fact, a business can keep these documents confidential among members if preferred. Operating agreements function as a legal contract between or among members of a multimember LLC, though even single-member LLCs can benefit from one, too. It usually includes basic information about the LLC and its owners (known as members), the company’s elected tax treatment and guidelines for how certain key procedures will be handled. The designation was created largely to increase small business access to the protection from liability afforded to corporate shareholders.Īn LLC operating agreement identifies the company, states its ownership, defines member duties and lays out other structural features of the business. LLC stands for “ limited liability company” and is the most popular structure for small businesses in the United States.
