Tn Single Member Llc Operating Agreement

Tn Single Member Llc Operating Agreement

When it comes to starting a business in Tennessee, one option to consider is forming a single-member Limited Liability Company (LLC). This type of company structure provides protection for the owner`s personal assets while still maintaining the flexibility and simplicity of a sole proprietorship. However, to ensure the LLC operates according to the owner`s desires and intentions, it`s important to have a comprehensive operating agreement in place. In this article, we`ll take a closer look at what a single-member LLC operating agreement is, why it`s necessary, and what it should include.

What is a single-member LLC operating agreement?

An operating agreement is a legal document that outlines how a limited liability company will operate. It`s essentially a contract between the LLC and its members, which in this case, is just the single owner. The operating agreement will define the owner`s role, the company`s structure, management responsibilities, and the rights and obligations of the owner.

Why is a single-member LLC operating agreement necessary?

Even though the state of Tennessee does not require single-member LLCs to have an operating agreement, it`s strongly recommended that one be created. Without an operating agreement, the owner may be subject to state laws that dictate how their LLC operates. These laws may not align with the owner`s intentions or desired business structure. Additionally, having an operating agreement in place can act as evidence in court if there is ever a dispute among members.

What should be included in a single-member LLC operating agreement?

A thorough operating agreement should cover the following topics:

– Company Structure: This section should outline the name of the LLC, its purpose, and the type of business it conducts.

– Member Responsibilities: This section should define the owner`s role in the LLC, including their voting rights, decision-making authority, and any limitations on their liability.

– Management Structure: If the owner chooses to appoint a manager to run the day-to-day operations, this section should outline the manager`s responsibilities and authority.

– Capital Contributions: This section should outline any initial investments made by the owner, as well as any future contributions or borrowing limitations.

– Profit and Loss Allocation: This section should outline how profits and losses will be divided between the owner and the LLC.

– Distributions: This section should outline how profits will be distributed to the owner and when they will be paid out.

– Dissolution: This section should outline the process for dissolving the LLC in the event that the owner decides to cease operations.

Conclusion

In summary, a single-member LLC operating agreement is a legally binding contract that outlines how the company will operate. Although not required by the state of Tennessee, creating an operating agreement is an important step in protecting the owner`s interests and ensuring the LLC operates according to their desired structure. By including the topics outlined above, the owner can create a comprehensive agreement that provides clear guidance on their role, the company`s structure, and how profits will be allocated and distributed.

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