Two key documents when forming a company or business are an Operating Agreement and the Bylaws. The Operating Agreement is used for Limited Liability Corporations (LCCs) and the Bylaws are used for corporations. Both Operating Agreements and Bylaws are internal governing documents used by the company to spell out the basic operating procedures for the company.
The Operating Agreement is a legally binding contract that’s entered into between the owners of an LLC. Generally, the owners determine how they want their company run. The agreement is the framework as to how the company should be governed, the initial money or in-kind contribution given, management responsibilities, accounting principles and how the company should function. A complex Operating Agreement should include how the tax returns will be prepared, who will prepare and be responsible for them, restrictions regarding the purchase or sale of the company’s interests and business succession (what happens if one of the owners dies?).
These documents outline all the financial and functional decisions of a business. They also include rules, provisions and regulations that will determine and administer the operations of a business and written to outline the specific business needs and the needs of the business owners and should be in place when you incorporate your business. They’re also required for numerous other circumstances such as obtaining a loan or financing.
The Bylaws for a corporation are very similar to an Operating Agreement. The Bylaws determine how a Board of Directors will govern the company. The Bylaws usually have statutory requirements detailing what must be in the bylaws, including the number of board directors, how shareholder and special meetings may be called and held. Like Operating Agreements, the Bylaws can be complex and include other guidelines and regulations as to the governing of the company.
One problem our experienced business attorneys have discovered, is that many start-up companies will download a “one-size fits all” Operating Agreement or Bylaws. The reality of these “one size fits all” is every company is distinct and will face varying issues that aren’t mentioned in the documents. The downloaded documents are not comprehensive and won’t cover significant necessities. Owners rarely understand the full complexity of issues they could face but will sign the documents anyway. Not all company owners and management have the same expectations and often find themselves at odds with contrasting ideas and views. These are the companies that end up having to seek attorneys to sort out discrepancies and disputes regarding inconsistencies and inadequacies that often lead to expensive litigation.
Gantenbein Law Firm’s skilled business attorneys can help you avoid unnecessary legal hassles and a lot of grief by tailoring an Operating Agreement and Bylaws that are specific to your business.
Well-crafted Operating Agreements (for LLCs) and Bylaws (for corporations) are crucial to the success of a business.
The business lawyers at Gantenbein Law Firm, in Denver, are experienced in drafting the best bylaws and operating agreements for your business.
To schedule a consult, call 303-618-2122.