Wyoming LLC Operating Agreement
Your Wyoming LLC operating agreement is a road map that serves as a guide through the process of dealing with questions of ownership and business management. An operating agreement establishes the rights, powers, duties, and liabilities of all members of an LLC. Although operating agreements aren’t required by state law, your LLC operating agreement is the most effective way to organize your company’s internal workings.
Why do you need an operating agreement?
- Protect Liability and Control
Just by forming an LLC in Wyoming, you better protect your personal and business assets. However, you can address many more details in your operating agreement. For example, can members choose to transfer their interest to someone outside the LLC? What steps should the LLC take if a creditor is awarded a member’s interest? What legal and financial actions can a member or manager engage in without approval of other members or managers? Your operating agreement can help answer these questions.
- Clarify Verbal Agreements
Even if members have orally agreed to certain terms, misunderstanding or miscommunication can take place. It is always best to have the operational conditions and other business arrangements handled in writing so they can be referred to in the event of any conflict.
- Avoid Relying on Default Rules
State default rules govern LLCs without an official operating agreement. This means that each state outlines default rules that apply to businesses that do not sign operating agreements. Because the state default rules are so general, it is not advisable to rely on a state governing body to manage your agreement.
Where should operating agreements be kept?
You don’t have to file your operating agreement with the state, but it’s best if you securely file it away with the rest of your LLC’s business records. If a dispute, legal issue, or business opportunity like a partnership or merger arises, you may need to produce your operating agreement and any amendments.
If there is only one owner of an LLC, is an operating agreement still necessary?
We think so. Don’t be fooled into thinking that your LLC only needs an operating agreement if there are multiple owners. Here are three reasons a single-member LLC should prepare an operating agreement:
- Your operating agreement defines your LLC
Your operating agreement allows you to define what your business will be and how it will operate. It records you as the owner and sole member. It records your capital contributions and defines your financial, organizational, and record keeping practices. Because the operating agreement is a record of this essential information, it can be used as supporting documentation for business loan and bank account applications, vendor agreements and more.
- Separate the business from the owner
One of the great benefits of forming an LLC is the legal separation of the business and the owner of the business. While a single member LLC doesn’t have to deal with possible disagreements between members, its operating agreement is one of the linchpins that proves the entity is truly separate from the owner. In short, an operating agreement is just one piece of a properly formed LLC, and when a single member LLC shows that all the i’s are dotted and t’s crossed, it will go a long way in helping to ensure limited liability. Having a formal written operating agreement will lend credibility to your LLC’s separate existence.
- Clarify the succession of the LLC
What will happen to your single-member LLC if you pass on? It may be a grim topic, but succession planning is a critical component of drafting a comprehensive LLC operating agreement. Clearly defining what will happen to your LLC in your operating agreement can help your business partners and your loved ones avoid unnecessary confusion and disagreements down the line.
- Your operating agreement defines your LLC
What Should a Wyoming LLC Operating Agreement Include?
Operating agreements may address any number of topics, depending on the circumstances of a particular LLC. For example, members may wish to include requirements for periodic meetings, restrictions on check signing, or processes for how disputes within the company will be handled. Keep in mind that your operating agreement can be updated at any time through a process of your choice.
When you hire us to form your Wyoming LLC, we provide you with an LLC operating agreement that covers key topics to best protect and organize your business. Whether or not you use our services, you should have an operating agreement. Here are six issues that we think your LLC’s operating agreement should cover. Our Wyoming LLC operating agreement covers these and much more.
Organization deals with the creation of the company. It covers when the company is created, who the members are, and the structure of ownership. If there are multiple members, they may all have equal ownership or different amounts of “units” of ownership.
- Management and Voting
Your operating agreement should address how the company is managed and how the members vote. The company may be managed by the members or by managers that are appointed by the members. The operating agreement specifies what authority each person has over company affairs. The company may choose to make decisions though a voting process. Votes may be allocated among the members in any number of ways, including one vote per member, one vote per unit of ownership interest (if the company ownership is described in terms of units), etc. The operating agreement may specify the number of votes required for particular actions by the company.
- Capital Contributions
This section covers which members have given money to start the LLC. It also discusses how additional money will be raised by members. For example, an LLC can choose to issue ownership “units” in exchange for money. The money and other assets that members provide to start the LLC are called capital contributions. Your agreement should note each member’s contributions and their percentage of ownership interest.
How will your company’s profits and losses be shared among members? This might include money, physical property, or other business assets.
- Membership Changes
Your operating agreement should describe the process for adding or removing members. It should also state if and when members can transfer their ownership of the company. For example, the company will want to specify what happens if a member dies, a member goes bankrupt, two members divorce, etc.
- Dissolving the LLC
The operating agreement should explain the circumstances in which the company may be or must be dissolved. This is sometimes called “winding up” the affairs of the company.
When you couple a Wyoming LLC’s enhanced privacy laws with the state’s strong liability protections, it’s easy to see why Wyoming is such a great place for businesses. If you hire Best WY Registered Agent to form your LLC, we can draft your operating agreement, which saves you time and will make LLC ownership go a whole lot smoother.