A Georgia LLC Operating Agreement is a legal document that provides all the details about the ownership structure, management, rights, and responsibilities of every Limited Liability Company (LLC) member.
An operating agreement also covers the distribution structure and modalities of profits, information of what is expected of new members in terms of investment, and every other aspect of a business down to the dissolution processes.
Creating a Georgia LLC involves filing for an Articles of Organization form with the Secretary of State’s Corporations Division. This form will require all information about your business, like your registered agent’s official name and contact information. You will also need to fill a Transmittal Form if you want to set up an LLC in Georgia.
While Georgia’s Secretary of State might not require your LLC to be in business, you need to have one if you must assert credibility as an entity. In addition, the entire endeavor might look a bit sketchy without setting transparent modes of operations for your LLC and separate personal assets from business assets in case of litigations.
This document is structured specifically for the LLC in question, considering them in it. Owners of an LLC are referred to as ‘members,’ and once all signatories to this document have signed on it, it becomes binding on all of them.
For that reason, it is recommended that you employ the services of an attorney while drafting and signing your operating agreement to ensure that all necessary criteria are included in it before signing.
Georgia Limited Liability Company Act: Title 14, Chapter 11 (enacted in 2019 covers a comprehensive list of rights and approved norms for corporations, partnerships, and associations)
Operating Agreement Laws: § 14-11-1107(b) (states that the enforceability of operating agreements and the freedom of contract is to be given maximum effect)
State Definition: § 14-11-101(18) (outlining the differences and the meaning of the elements that ensure they are mutually exclusive or not)
Types of Operating Agreement
Following are the types of LLC operating agreement:
Single-member LLC operating agreement
This document is for single-owned LLCs; it enables them to protect their assets from losses to the expense of the business in cases of a collapse in business or litigation.
Download: Microsoft Word (.docx)
Multi-member LLC operating agreement
This is a legal document for LLCs formed by multiple members. All members agreed upon and signed this document as a binding document guiding their policies, procedures, roles, and responsibilities.
Download: Microsoft Word (.docx)
Advantages of Operating Agreement
The U.S Small Business Administration (SBA) maintains that obtaining an operating agreement for your LLC guarantees the protection of your business’ limited liability status, clarification of verbal contracts, and protection of your assets, amongst other benefits. Here are some of them:
Clarity in verbal agreement
Oral agreements among members are not enough if you want to run a successful business. The operating agreement helps to put all that in writing, and it is signed by all parties involved. It becomes a reference point in the event of misunderstandings and conflicts among members.
Avoid state interference
If your LLC has an operating agreement, the rules and codes of conduct therein become the presiding guidelines for the operation of the business, as opposed to the generic rules guiding LLCs in Georgia.
For example, according to the probate law of Georgia, when a business owner dies, their ownership interest in the business becomes a part of their estate. This law will, however, be secondary to the terms agreed upon in the operating agreement.
Another importance of having an operating agreement is that it gives your business credibility and legitimacy, at least in the eyes of potential investors and other businesses looking to strike deals with you. In many cases, many investors will ask to see the contract and what it entails before deciding whether or not to do business with you.
Protection for personal assets
An operating agreement helps separate your business assets from your assets, such as houses, cars, bank accounts, etc. For example, suppose in any event your business gets sued in court. In that case, your operating agreement will help uphold your limited liability status, thereby treating your assets as a separate entity from your business.
LLCs are generally flexible, which is a massive advantage for you, especially when creating an operating agreement for your business. Because of the flexibility, you can include as many more clauses and details in your operating agreement as you desire to have firm control of the day-to-day running of the business.
Information to be Included
While you’re at liberty to structure your operating agreement as desired, there is certain information you must have in your Georgia operating agreement to ensure the success of your business.
Some of this information is as follows:
As obvious as it sounds, this is an essential item that must be contained in your operating agreement. Clearly state what sort of business you intend to run and its full name as recognized by the Georgia Secretary of State when you registered the company.
The chosen name must match what you already have in your Articles of Organization file and should not show any “doing business as” (DBA) names. Otherwise, it will not be approved.
To avoid disagreements and disputes in the future, it only fits that the request of the LLC be expressly stated in the document as it is in your Articles of Organization, along with the names, titles, addresses, and percentage of ownership each member has. That will come in handy when some members’ capital investments are higher than the others.
For example, one member has $1000, and another person invests $5000. The apparent owner should reflect on the Operating Agreement as owning the most percentage of the business. Hence they become the owners.
LLCs can either be managed by the members or by a manager. Whichever way you decide for your LLC to be addressed, it must be represented in your Georgia LLC operating agreement. The “member-managed” structure works in a way that the owners of the business are the ones running its day-to-day activities.
On the other hand, the “manager-managed” setup gives management powers to a particular member to handle. If there are exceptions for changes in the structure, it must also be stated in the contract.
Duties of members
Like every successful business, an LLC must have outlined roles and responsibilities of members and managers. This prevents frictions and arguments and fosters growth and the seamless running of the company.
Voting rights and responsibilities
You must ensure that your operating agreement clearly states what actions will require member votes and what percentage would be needed to approve said votes. Voting plays a significant role in the decision-making of LLCs, as it influences everything in the business, new members, and future collaborations with other companies.
Because of this, thorough care must be put into deciding the voting rights and responsibilities in a Georgia LLC.
When creating your Georgia LLC operating agreement, make sure that the methods and structures of distribution of profits are clearly stated and agreed upon by members. If, for instance, the profits will be shared according to members’ initial investment, it should be highlighted in the operating agreement. This includes the date and methods of distribution.
Regular meetings between members and managers are essential for the growth and longevity of any business, so your operating agreement has to reflect meeting dates.
Putting this in your operating agreement keeps every member informed and abreast of the company’s progress and overall goals. In addition, other essential activities like voting and distribution are conducted when meetings take place, hence the need to have it in your document.
Buyout and buy-sell rules
Buyout and buy-sell agreements are contracts between owners of businesses that decide what happens when a member leaves the company. Decisions like what should happen to a member’s ownership percentage when they leave should be included in this agreement.
For example, is their ownership percentage transferable to a third party, or can existing members buy it over? These modalities must be carefully outlined in your operating agreement.
Other matters like how new members are allowed into the business should also be highlighted. For example, do they need to make a capital investment before joining? Who and what is involved in the voting process for their acceptance or non-acceptance? Etc.
Your Georgia LLC operating agreement must make plans for the succession of the business in the event of the death or retirement of founding members. The contract should be clear on what becomes of their membership percentages and the modalities for such decisions.
In the rare case of members deciding to dissolve the business, your Georgia LLC operating agreement must include the details and procedures for this dissolution as agreed upon by members. You will have to file for a Certificate of Termination to dissolve a Georgia LLC.
Modification to the agreement
The operating agreement is subject to alteration and change. However, there must be laid down procedures and guidelines for the modification in the document, and it must be signed by all members involved.
This clause in the operating agreement validates the operating agreement as a whole, even if certain aspects or provisions in the agreement may be invalid.
Georgia LLC: Points to Consider
Here are a couple of things you must note when creating your Georgia LLC operating agreement:
The regulations that will apply to your LLC will depend on the country where you situate it. If your LLC is not located in Georgia, you will have to apply for specific permits from the Georgia Department of Revenue and register.
You must have a Georgia-based registered agent or a registered agent company for foreign LLCs. You will also require a Certificate of Authority to be able to register your business in Georgia.
Operating Agreement Template
Building an Operating Agreement that will stand out and meet the specific needs of your business is no simple task. Therefore, it is recommended that you seek the guides of an attorney and use the most appropriate and complete template for it.
We provide the best Operating Agreement templates for LLCs of all types. With a wide range of templates available on the website, we have just the right one to suit your business’ goals and align with your expectations.
How to Form an Operating Agreement?
Your business name must contain “Limited Liability Company,” “Limited Company,” “LLC,” or simply “LC.” If the business name appears to be similar to other business names, it will be rejected.
Here are a few steps to guide you when forming your Georgia operating agreement:
Choose a registered agent
Your Georgia LLC is required to have a Registered Agent who will be responsible for receiving legal paperwork on behalf of the LLC. Keep in mind that such agents, a corporation or an individual, must be official residents in Georgia.
Article of Organization
This is a compulsory form required by the Georgia Corporations Division to create your business entity. You are required to fill out every information about your LLC, including a physical address that must be in the state of Georgia. If your LLC is a foreign one (outside Georgia), you’ll be required to fill out a Certificate of Authority form instead.
The filing fees for creating your LLC will depend on if it’s a domestic or foreign LLC. For domestic LLCs, the cost is $100, while it is $225 for foreign business entities. If you’re applying online, you’ll be required to pay with your credit card.
The operating agreement is a legal document that details members and managers’ interests, highlighting the roles of all parties involved in the business. Though Georgia State laws do not require this form, your business must have one to improve its performance and enjoy the full benefits of LLCs.
In Georgia, if your business plans to carry out financial transactions, you must apply for an Employer Identification Number (EIN). This will be required when you apply for financing, hire employees, open a bank account, etc. You can apply for EIN online by using the IRS Website or through an email.
Frequently Asked Questions
An operating agreement is not required in Georgia to set up your LLC, but you must get one because of its numerous advantages.
No, a single-member LLC doesn’t an operating agreement in Georgia, but it is recommended that they enjoy the limited liability benefits of owning an LLC and position the business as separate from the individual.
You will need a lawyer to advise you on the processes involved in creating an operational agreement that will be best suited for your LLC.