LLCs are popular among owners of small businesses. With an LLC, the business owner has limited liability protection of a corporation but is more flexible and easier to manage just like a partnership. Idaho LLC operating agreement is a written agreement between members in the business which they must keep safe and accessible.
An Idaho LLC Operating Agreement refers to a legal document where members write down the policies and operating standards that they believe will be the best for their company.
The company in question could either be managed by the members or it can have a manager in place to manage the affairs of the company. Therefore, LLC operating agreement is recommended in Idaho even though business owners are not obligated to have one.
Limited liability companies are faced with the challenge of managing business crises. Some business owners take responsibility for a failed business. Getting an LLC operating agreement saves you from the stress of running your business. Idaho LLC operating agreement outlines your company’s structure, governance, management, daily operations, and membership.
LLC operating agreement prevents conflicts among business members, making it essential to get an operating agreement for your company. The document outlines the personal properties and the financial assets of all members and differentiates them from the business debts.
Therefore, in the case of litigation, bankruptcy, or any other finical problems or failure of the business, the document will be presented to protect members of the company from any form of harm. Also, the document allows the members of the company to enjoy the implementation of tax benefits attached to having an LLC.
You must take your time to draft your Idahlo LLC agreement before you launch your company because it is one essential document that every business must-have. Since you are not filing the operating agreement with the state, it usually does not come with a fee. However, you might have to pay between 100 and 120 dollars to get a Certificate of Organization.
Limited Liability Company Laws: Title 30, Chapter 25
Operating Agreement Laws: § 30-25-105
State Definition: § 30-25-102(9)
Types of the Agreement
There are two types of Idaho LLC operating agreements; Multi-Member LLC operating agreement and Single-Member LLC operating agreement. Regardless of the operating agreement you choose for your business, your LLC operating agreement should address your organization, capital contributions, the transfer of ownership, and how gains and losses are distributed among members.
Single-Member LLC Operating Agreement
This type of LLC operating agreement is for sole business owners. The purpose of an LLC operating agreement is to outline policies that support the vision of your company. It also protects your financial assets.
Download: Microsoft Word (.docx)
Multi-Member LLC Operating Agreement
This type of LLC operating agreement is for businesses that have more than one member involved in the company’s management. This agreement outlines the policies that will guide its operations, and all members must accept them. While it is not deemed compulsory, business owners should implement the Multi-Member LLC operating agreement. An operating agreement gives your business the protection it needs to survive through business crises like bankruptcy and litigation.
Download: Microsoft Word (.docx)
Why Create an Agreement?
There are a lot of reasons you should consider getting your business an Idaho LLC operating agreement. Companies have ignored the benefits of the operating agreement because they do not understand its purpose.
Here are the reasons to create an Idaho LLC operating agreement:
One of the reasons you should create an Idaho LLC operating agreement is because the state highly recommends it. It is outlined in the Idaho Statutes Section 30, 25, 105 that all Idaho LLC should create an operating agreement. Forming an LLC operating agreement helps to control the operations and management of the company effectively.
For multi-member companies, it is essential to create an operating agreement. In a company where more than one member participates in the management, making an operating agreement will reduce conflicts. The membership determines an operating agreement, so all members’ interests are represented. LLC operating agreement prevents conflicts because it outlines the responsibilities and contributions of every member.
Preserves limited liability company status
An operating agreement gives your business more credibility and validity. In addition, getting your business an LLC operating agreement as a sole business owner will help preserve your limited liability status and separate your assets from company assets.
Besides, an operating agreement is important when seeking investors or funding for your business. Banks and other lenders often request to see this file before they can allow you to open a business account with them.
Beyond financing, the operating agreement is important and acts as the backbone of any organization. It provides a detailed guide for the daily operations of your business. Also, it outlines the procedures to settle disputes. Without an operating agreement, you will be defaulting to the laws of Idaho state regarding LLCs.
Information to be Included
There is no particular structure for your Idaho LLC operating agreement. It is up to you to draft a formal document that best represents the interest of your company. LLC operating agreement entails operating procedures, management, and capital distribution.
However, there is some basic information that must be included in an Idaho LLC operating agreement:
Who were the founding members of the LLC at its formation and how did they divide the ownership of the company? LLCs that have multiple members can use an equal ownership structure and, in some cases, they might assign units of membership to members of the company.
This is regarded as one of the significant pieces of information to be included in your operating agreement. The name of your LLC must correspond with the name of the organization you have registered through your Certificate of Organization. In addition, you must include the designator word you chose in the Certificate of organization in your LLC name.
The members and owners of the LLC are to be included under the ownership section in the operating agreement. You must add the contributions of each member and their ownership interest. Members must collectively agree on the decision about how ownership interest must be shared. While some LLCs might choose to divide ownership interest equally, others consider the individual capital contribution.
Your operating agreement must also include the organization’s decision concerning the management structure in the operating agreement. While there are two management structures, member-managed and manager-managed, the central management stated in the Idaho state statutes is member-managed. However, you must clearly state the type of management structure you prefer for your company.
Roles and responsibilities
The LLC operating agreement also includes the responsibilities of the members and managers. The power and duties of members and managers must be included in the operating agreement to ensure effective implementation. The operating agreement must state the amount of control the managers must have and their decisions.
The operating agreement must include the voting rights and responsibilities of every member. The operating agreement must consist of when and how voting must take place. The factors that determine the value of every vote must also be identified.
If the value of each vote is determined by the percentage of ownership interest or any other factor, it must be clearly stated in the operating agreement. In a situation where the company has managers, what level of control will they have over the daily affairs of the company. You need to determine what decisions the members can make and what are the responsibilities of the managers.
You must maintain the records of the capital contribution of all owners. In this case, you are to add the names and information of all members and the percentage of all members. All owners are to decide how the interest should be divided among all members either equally or based on the time and effort contributed. At this point, you will also determine the approach for raising extra funds in the future.
The operating agreement must also include how profits are to be distributed among members and the methods of dividing these profits. Every member must agree to every decision that they will include in the operating agreement. The time frame by which the interest will be shared must also be included. It could be quarterly, monthly, or annually.
Asides from allocating profits to each member, you also have to decide how the members will get their payments and how often they will be paid. That is, will the member receive their profits as bank deposits in their respective bank accounts or will they get checks, or if they will get their compensation in some other ways.
Adding the guidelines for scheduling and holding meetings into your operating agreement is essential. You must also include issues like the time, location, and how meetings are to take place. While there is no legal requirement, these guidelines enhance effective operations.
Buyout and Buy-Sell rules
Your operating agreement must integrate policies for members that leave the business either a member retires or because someone tries to experience another field. It could be worse to alter the LLC in case of a death, bankruptcy, or divorce. The processes through which members that go to the LLC are paid must also be included in the operating agreement. Your operating agreement must also include how the portion of the leaving member will be shared.
Dissolution of the LLC
Your operating agreement plays a vital role in the dissolution of the LLC, just as it has a role in guiding the formation of the LLC. Accordingly, you must state the steps to be taken to close down the business in your operating agreement. You must also discuss the remaining assets after the dissolution of the LLC. Also remember that when you dissolve your Idaho LLC, you need to file a statement of dissolution.
This section will deal with the steps to close your business. The exact percentage of members’ vote to stop this operation. Must there be a unanimous vote? Or you simply need a majority vote to proceed with the decision. Situations like this can come with lots of stress that will likely create disputes amongst members. Therefore, it is important that you plan for the movement and put the details of the process in writing.
Your operating agreement is flexible and can be modified. If there are any changes in policies in the company, you can change the operating agreement to adapt to those changes. This can only be determined by votes which must be stated in your operating agreement.
Creating an Idaho LLC operating agreement can be pretty tricky. This is why we have created a free downloadable sample for you to use below:
Steps to Form an Agreement
The following points can be considered important in this regard:
Idaho demands that all LLCs have a registered agent to act as a third party for the company. The agent must be an individual residing in Idaho or a business entity in Idaho.
Complete the application
There are different application methods to choose from. For example, you can either form a new company (known as Domestic LLC) or register a pre-existing company formed outside Idaho (known as Foreign LLC). In addition, you can decide to submit your application online via mail or in person.
Before you can complete the LLC filing process, you need to pay a fee. If you are filing for a domestic LLC, you will have to pay $40 and a fee of $90 if you are filing for a foreign LLC. When you are done, send all the articles due to this address:
Office of the Secretary of State, 450 N 4th Street, PO Box 83720, Boise, ID 83720-0080. If you would want to expedite your filling, you should include an extra 20 dollars.
Business owners are to draft an operating agreement. This will help provide clarifications on the separation between company assets and the personal earnings of the ownership.
You are not under any legal obligations to file this document in the state of Idaho. However, you need to draft one to help you organize the structure of your LLC’s internal affairs.
After filing for LLC, you must apply for an Employer Identification Number so that the Internal Revenue Service can supervise the company’s financial activity. After the successful application of the EIN, the company will pay employees and get loans legally.
Frequently Asked Questions
Yes, an LLC operating agreement is required in Idaho. However, Idaho allows businesses to operate without an operating agreement.
Idaho does not need you to file an operating agreement. However, the operating agreement should be kept somewhere safe and where members can easily access it after it has been created.
You should create your operating agreement before filing for articles of organization.
The laws of Idaho State do not require you to file an operating agreement. Once the membership of your LLC agrees to the document, you can then keep the file as an internal document at your LLC’s place of primary business.