Page 8 - Southern Exposure - September '20

dAting from page 7
Page 8, Southern Exposure BW

elder eStAte PlAnning

Five Reasons Your Single-Member LLC

Needs An Operating Agreement

Submitted by Anné Desormier-Cartwright, JD
An operating agreement Without an operating agreement in place, the business sync. Or, if your single-member LLC doesn’t have an
is a contract that controls may look like a sole proprietorship. If a court doesn’t see operating agreement in place, we’ll work with you to
your LLC’s operations as your LLC as an entity separate from you, you could lose craft an appropriate agreement.
well as member interaction the liability protection that an LLC offers. If you have questions about this or your estate plan
with each other and with the and what documents are necessary schedule a free
LLC. You may think that an Reason 4 – Clarify Succession consultation today by calling our office at (561) 694-
operating agreement is not An operating agreement can specify what happens if 7827, Anné Desormier-Cartwright, Esq., Elder and Estate
necessary for your single- you die or become unable to run the business. Without Planning Attorneys PA, 480 Maplewood Drive, Suite 3,
member LLC – after all this specific provision, your family may have a hard time Jupiter, FL 33458.
– why make an agreement continuing the business or winding it down. The content of this article is general and should not be
with yourself? relied upon without review of your specific circumstances
Reason 5 – Scalability by competent legal counsel. Reliance on the information
Is The Operating Agreement A Legal Requirement? Successful businesses grow. And growth requires herein is at your own risk, as it expresses no opinion by
Most states don’t require an LLC to have an operating capital. An operating agreement can specify how future the firm on your specific circumstances or legal needs.
agreement. Of the states that do, some require the investors will be treated. If you structure these terms in An attorney client relationship is not created through the
operating agreement be written while others permit oral the operating agreement, the LLC will be better positioned information provided herein.
agreements. No state requires an LLC to file an operating in the investment negotiations. To comply with the U.S. Treasury regulations, we must
agreement with the Secretary of State; instead, the inform you that (i) any U.S. federal tax advice contained
operating agreement is kept with other business records. Let’s Continue This Conversation in this newsletter was not intended or written to be used,
No matter what state you’re in, however, it’s always a An operating agreement serves an important role, even and cannot be used, by any person for the purpose of
good idea to create a formal, written operating agreement for a single-member LLC. The operating agreement puts avoiding U.S. federal tax penalties that may be imposed
– even for a single-member LLC. Here’s why: you in the driver’s seat and enables the LLC to perform on such person and (ii) each taxpayer should seek advice
its main task – to limit liability. from their tax advisor based on the taxpayer’s particular
Reason 1 – Avoid State-Imposed Default Rules If you have an operating agreement in place, we’d be circumstances.
Without an operating agreement in place, your LLC is happy to review the agreement as well as your business
bound by the default rules of your state. Most state laws needs to ensure the operating agreement and LLC are in
governing LLCs allow the default rules to be overwritten
in the LLC’s operating agreement. Some of the default
rules in Florida may not be beneficial to you.

Reason 2 – Maintain Control
As the business gains momentum, you may want to
hire a manager to take care of the day-to-day business
operations so you can shift your attention to business-
development opportunities. An operating agreement can
define the manager role – designating the authority and
compensation and what happens if the manager leaves or
competes with the company.

Reason 3 – Keep Business And Personal Identities
Separate 747-PALM
An operating agreement helps distinguish the business
from the owner for liability purposes. A major benefit 747-7256
of an LLC is that it limits liability going both ways: the
LLC protects a member from business liabilities and the
business assets from a member’s personal liabilities.

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