Business Startup

LLC Operating Agreement series: Exit Strategies and Provisions

Aside from choosing what entity to form your business as, one of the most important considerations in the early stages of forming a company is the exit strategy. Ironic as it may sound, deciding how to get out of the business in the beginning can save you and your business partners time and money down the road. As we’ve discussed throughout our series on LLC Operating Agreements, there’s tons of flexibility when deciding what provisions to include in your operating agreement. It’s no different when deciding on exit strategies, restrictions, and procedures for your LLC. Some operating agreements are silent on this point, while others include extensive restrictions and procedures for getting out of the company. Today’s post will detail some of...

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Business Startup

LLC Operating Agreement series: Members’ Rights

What rights do you have as a member of an LLC? As we lawyers love to say, it depends. The short answer to this question is that your rights are controlled by state statute and by your LLC’s operating agreement. The laws governing limited liability companies (LLCs) allow for flexibility, including the ability to draft unique operating agreements with varying rights and obligations. This ability to determine the rights and obligations is one of the greatest advantages of forming an LLC since it allows different businesses to modify ownership, financial and governance structure in the most effective way for that particular LLC. This flexibility also means that members’ rights tend to vary from one LLC to the next.

In this latest...

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Business Startup

LLC Operating Agreement series: Management Structure

Over the next few months we’ll be discussing some of the common terms of an Limited Liability Company operating agreement in a series of posts. The operating agreement provides the framework for operating and managing the business. The operating agreement provides the rights and obligations of the members, including members’ management abilities and economic interests. Without an operating agreement, Washington LLCs are governed by the default provisions provided in RCW 25.15 . In this first post, we’ll discuss the management structures and choices available for an LLC.

Key Feature: Flexibility

In Washington, the LLC statutes are incredibly flexible. LLCs are easily adaptable to the changing needs or circumstances of the members and the business. There’s also flexibility when choosing the management structure of the company. The primary constraint...

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Business Startup

LLC Operating Agreements – Economic Structures

The economic structure of a limited liability company determines the amount and timing of the distributions of cash and property to the members (remember that in an LLC owners are called “members”). Distributions may occur periodically during the operation of the organization and at the time when the organization either redeems the member’s interest or liquidates.

Washington law provides a default rule that members will receive distributions and allocations of profits and losses in proportion to the amount of capital each member contributed to the company (RCW 25.15.205). (A distribution is something a member actually receives from the LLC. An allocation of profit or loss is a tax and accounting concept that relates to the division of profits and losses for...

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Business Startup

LLC Operating Agreements Series Intro

One of the most appealing attributes of the limited liability company and why it has been so widely adopted is the flexibility it affords the owners with respect to management. LLC operating agreements are for an LLC what bylaws are to a corporation. The operating agreement can be thought of as providing the “laws” of the business, laying out how the company will be managed. The operating agreement provides the rights and obligations of the members, including members’ management abilities and economic interests. Without an operating agreement, limited liability companies are governed by the default provisions (in Washington, they are provided in Chapter 25.15 of the Revised Code of Washington). This inVigor Law Group blog series includes insight into some...

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