Dinn, Hochman & Potter, LLC
TF: 800-233-4079
L: 440-681-8005

Why should an operating agreement be part of business planning?

Many new companies here in Ohio choose a limited liability company as their structure. The paperwork filed with the required governmental agencies is manageable and the members receive certain benefits. The part that many people often dismiss the importance of is the operating agreement. This document is actually an important part of business planning.

An operating agreement shows separation between the member or members and the business. Some Ohio business owners may think this is what they did by forming the business, but it may not be enough to convince tax authorities or those who may try to get to the owners for liability purposes. The agreement also outlines how the business will operate. It often includes which members will be responsible for certain activities, along with other important issues regarding the general and daily operations of the business.

One of the most important facets of an operating agreement is delineating what happens when a member of the LLC wants to leave, dies or goes through a divorce. It could also include provisions regarding who steps into a member's shoes if he or she becomes either permanently or temporarily incapacitated. This helps protect the company, which is the point behind an operating agreement.

It may seem cumbersome to sit down and create an operating agreement, but it does serve a crucial purpose in business planning. Ohio entrepreneurs may not understand its usefulness at first, but at some point, it will come in handy. In order to make sure that it protects the rights of its members and the company, it would be beneficial to take the necessary steps to make sure the operating agreement works as needed and complies with current law.

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Cleveland, OH 44124

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