Operating Agreements for Businesses in OhioAn operating agreement essentially acts as the Constitution of a company - it mandates how things are to be done and how new policies are to be put in place. The law firm of Harris & Engler helps businesses in Ohio in all manners of formation and operation. Harris & Engler is located in Columbus, Ohio, and its attorneys help businesses with their operating agreements and other formation issues all over Central Ohio, including Franklin County, Delaware County, Union County, and Fairfield County. In Ohio, an operating agreement is not actually required in order to form a limited liability company. However, it is very risky to run a company without an operating agreement in Ohio. It is risky for a number of reasons, such as:
- The whole point of forming a limited liability company is for LIMITED LIABILITY. This means, basically, if someone sues you - they can only sue and go after the assets of the company, and not you, personally. The case law in Ohio suggests that in order to be afforded the protection of limited liability, a business must abide by all corporate formalities in addition to merely filing the necessary documents to have the business officially started in Ohio. The operating agreement establishes those necessary corporate formalities for a business in Ohio.
- If you do not use your own operating agreement, then Ohio has a set of default rules that will apply to how your company has to operate. Why would you let a set of rules that you probably are not aware of control how your company is run when you can make your own rules? Ohio Revised Code section 1705.081 sets forth some of these default rules that take effect if you do not make your own rules. The attorneys at Harris & Engler help business owners make their own rules with skillful drafting of the businesses operating agreement.
- The operating agreement covers critically important factors such as how to admit new members (owners) to the company, how to expand the company, how to transfer or sell ownership stake in the company, and overall operation and governance of the company.
How to Get the Best Operating AgreementIf you are interested in drafting the best operating agreement for your business, then you should consult with an attorney and have an agreement specifically drafted towards your and your business' needs. Many people simply download a template form on the internet for an Operating Agreement, but those template operating agreements often lead to litigation later on when problems arise. When someone downloads a template operating agreement from the internet, sometimes they do not even read the agreement, but more so, even if the agreement is read, the terms of it may not be fully understand. Whether you've read it or understand it, once you sign the operating agreement you are beholden to the terms of it and that agreement will be enforced in a court of law. An operating agreement with good buy-sell provisions is critical for multiple member LLCs. The attorneys at Harris & Engler can help with your business formation and operating agreement needs in Columbus, Delaware, and greater Central Ohio.
A good operating agreement needs to be catered towards the size and needs of the business. Some businesses need an operating agreement that accounts for taking on new owners or investors and the agreement needs to provide for the way in which someone can buy into the business and whether that process dilutes the other owners' shares or not. One of the most crucial aspects of an operating agreement are the buy-sell provisions, or how to transfer or sell ownership of the company. You can read more about buy-sell agreements here.
Whether you have one owner, two owners, or more will dramatically affect how your operating agreement (and your overall business) should be structured. The best practice is to have a good plan in place before problems arise, so that when problems do arise (and they will) you already have a process in place to deal with them.