Writing An Operating Agreement That Works For You

28 06 2011

When you form a Limited Liability Company, your attorney should prepare an Operating Agreement. Your Operating Agreement is the contract that governs your company, and it is very important, especially if your LLC has more than one member. You should discuss the following issues with the other members of your LLC and your attorney before your Operating Agreement is prepared. If you already have an Operating Agreement that does not adequately deal with these issues, you should amend it.

1. Management/Control of LLC: Who will be responsible for managing the LLC? If more than one person will have management responsibilities, will you have to agree in order to make decisions? If you can’t agree, what happens? Will there be any compensation to members who take on a management role? Is there a non-managing member who will get a percentage of the profits? Think about how you will hire employees, take care of expenses, and who will be responsible for accounting issues.

2. Distributions: How will the income of the LLC be distributed?

3. Bringing in others: Can other investors be brought into the LLC, and if so, is agreement required? Will there be criteria for new members, or a process for approval?

4. Separation/if someone wants to leave/if someone dies or is incapacitated: What happens if a member of the LLC wants or has to leave? Is that partner entitled to transfer his interest?

5. Exit Strategy: Are you planning to go public or be acquired?

6. Capital: How much money is going into the LLC, and where is it coming from? Will more money be put in later? If the LLC needs more money, what will you do?

7. Dissolution: Process? Is there a time or event that should trigger dissolution of the LLC?

8. Death/Incapacity: If a member dies or becomes incapacitated what happens?

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What Kind of Lawyer Does a Start-Up Need?

27 06 2011

If you’re starting – or thinking about starting – a business, you know that every penny counts. Unless you are lucky enough to have a lot of funding from the start, you will need to make some hard decisions about what to spend on in the beginning. One of those decisions will, undoubtedly, involve legal fees.

As a business owner, you need to make your legal budget work for you. There are some things you can probably do without – or do on your own – in the beginning. There are other things that you need a lawyer to help with. Your lawyer should, ultimately, prevent legal problems and save you money. But hiring a lawyer is a daunting task. Here are the things you should be thinking about as you make this big decision:

– Your lawyer should be able to advise you regarding entity formation, intellectual property, funding and investment, and contracts. He or she should be focused on litigation prevention. If you are in a regulated industry, your lawyer should be familiar with it.

– Your lawyer should be comfortable discussing fees with you. Try to find a lawyer who is flexible about fees.

– Your lawyer should have experience working with start-up companies, and should be enthusiastic about your company. You want a lawyer who will be part of your team. He or she should point out problems and find solutions.

– Your lawyer should be available. Don’t hire someone who never returns phone calls or emails. You might need your lawyer to be available at the last minute.

– Your lawyer should be looking for a long term relationship, not a quick paycheck. A lawyer who wants to keep you as a client will treat you well.