The holiday season is rapidly approaching. The next big holiday we have on the calendar is Thanksgiving, a day which is mostly about giving thanks and expressing gratitude for our health, our business, and the people in our lives. This year, in addition to a big turkey and a family dinner, you should also take the time to express gratitude for your business. If you’re a business owner, you’ve no doubt put countless hours into building up your business and making it profitable. A great way to express gratitude for your business is to develop a solid operating agreement. The reason for this is because a solid operating agreement is one of the best ways to protect your business from costly disputes. This will help ensure that your business stays afloat.
In this post, we will go over the basics of these agreements and then discuss why these agreements can be so helpful.
Basics of Operating Agreements
An operating agreement – also called a shareholder agreement for certain business entities – is a foundational document which contains numerous pieces of critical information regarding your business. An operating agreement outlines the essential functions of your business, as well as basic information regarding its ownership structure, term, location, members, responsibilities of members, distribution of profits, distribution of losses, voting rights, and so on. In other words, an operating statement provides some of the most critical details about the nature of your company. In a sense, it is almost like the birth certificate of your company, except that it provides a great deal more information than what is found on a person’s birth certificate. This agreement signifies the true inception of your company, as it formalizes all the specific agreements which underlay the company.
Show Gratitude by Preventing Disputes
How can a solid operating agreement express gratitude to your company? The reason that a good operating statement can be an expression of gratitude is because your operating statement is a powerful tool for preventing disputes. In many cases, a company develops a poor operating statement, and then becomes financially successful. Eventually, disputes arise regarding one or more aspects of the company. If the operating agreement can’t be used to quell the dispute, then the ensuing litigation can oftentimes lead to the dissolution of the company. As mentioned, operating agreements contain detailed information on a variety of things: how the company will be managed, how certain terminology is defined, how certain decisions will be made, and so forth. If there is room for disagreement on these points, then it’s easy to understand how disputes can arise. If a company becomes financially successful, then one of the members may attempt to extract more money by exploiting the ambiguity of an operating agreement. A solidly constructed agreement prevents this from happening.
Simply put, a strongly developed operating agreement is an excellent means to celebrate your company and express gratitude. If your company has already launched, then you can review your existing agreement to ensure that no changes are needed. Developing a solid agreement will prevent costly litigation by quelling disputes before they arise.
Contact the Trembly Law Firm for More Information
At the Trembly Law Firm, we have expertise in the area of operating agreement drafting and can provide assistance in this area. We can also assist with updating an existing agreement. Contact our firm today by calling (305) 431-5678.