Even if you are a new business owner, you are likely aware that operating a business today can look quite different from a couple of years ago. And as such, now could be a good time to review your operation agreements – particularly if your LLC is undergoing a significant shift.
Possible changes to consider
Several elements of a traditional operating agreement could warrant review and revision over time, including:
- Membership/management details
- Percentage of ownership
- Roles and responsibilities of members
- Profit distribution
These represent some of the business’ financial and functional decisions that can prevent conflicts and provide clarity to relevant parties. And certain events could change these details, making it necessary to update these valuable documents.
When do I need to review our agreements?
Some business owners choose to review their agreements regularly, but there can be events or situations that make it wise to take another look at your operating agreement right now.
For instance, you might review your agreement if:
- Your members or managers change
- You change or establish a buy-sell agreement
- A member leaves
- There are changes in voting procedures
- Decision-making responsibilities change
- Your business moves
- You wish to distribute profits differently
These events can arise at any time for any business. However, if you are a relatively new owner or operate a small business, changes can seem more disruptive to the operational goals. And the past two years might have required a great deal of pivoting and adjustment.
Utilizing all the tools for your business
Operating agreements are crucial documents that affect how you run your business. However, they are not the only tool you have at your disposal. In addition to creating and reviewing operation agreements, you may also want to have:
- Partnership agreements
- Non-disclosure agreements
- Licenses and permits
- Business plan
- Employment contracts
Depending on the type of your business, these documents can also prove to be crucial in defining and protecting your business.