A Missouri LLC Operating Agreement is defined as an official document that highlights official procedures and the business structure.
It is used to direct how daily operations are handled and how decisions such as profit division, ownership distribution, duties allocation, etc., are made within the company. The document also highlights the members’ expectations in terms of members’, managers’, and employees’ conduct. A Missouri LLC operating agreement is also known as a Missouri membership agreement.
LLCs in Missouri are expected to have an operating agreement and should observe the following laws when creating an operating agreement.
Limited Liability Companies: Merger and Consolidation of Business Organizations – Chapter 347
Operating Agreement Laws: § 347.081
State Definition: § 347.015(13)
Types of Operating Agreement
An LLC operating agreement can either be a single-member or multi-member type of LLC operating agreement. Here is a short description of both types.
Missouri Single Member LLC Operating Agreement
A single-member operating agreement outlines how an LLC owned by a single person is governed along with the business’s internal operations.
Download: Microsoft Word (.docx)
Missouri Multi Member LLC Operating Agreement Template
A multi-member operating agreement is meant for LLC companies owned by more than one person to govern the company’s internal affairs and financial relationships.
Download: Microsoft Word (.docx)
Why an Operating Agreement?
Using an operating agreement to run an LLC business is worthwhile in Missouri. The benefits of an operating agreement will range from proper management to legal protection. Below are different ways LLCs tend to benefit from an operating agreement:
An operating agreement is a written document that outlines what is expected of each party involved in running an LLC business. Writing the rules and regulations prevents LLC members, managers, and employees from misunderstandings and conflicts. The responsibilities, roles, and expectations of each member are clearly defined in the document to avoid confusion.
Protects LLC status
An LLC structure of business ensures that the owners’ assets are separated from the company. As a result, the LLC owner is not liable for any liability of the LLC, such as debts. In addition, having a written document such as an LLC operating agreement further enhances the company’s limited liability status.
During the formation of an LLC, owners have to negotiate and enter into agreements that meet each LLC member’s expectations. Instead of making verbal agreements, operating agreements ensure they are written down, thus creating credible reference sources instead of relying on memory.
Missouri LLC businesses with an operating agreement are more credible than those that don’t. Credibility goes a long way in cooperating with banks and creditors and attracting investors as it indicates good preparation and organization of internal affairs of an LLC. For example, an operating agreement is required before an LLC company opens a bank account.
Required by the state
All LLCs, be it single-member or multi-member, foreign LLC, or domestic LLC, are all expected by the state of Missouri to have an LLC operating agreement. This stipulation is based on the Missouri Business Statutes (Section 347.081).
Information to be Included
It is important to know what needs to be included in a Missouri LLC operating agreement before creating one. There are primary sections that should appear in the document; however, its specifics are expected to vary from one LLC to another due to the interests of different LLC members.
Standard details found in an LLC operating agreement are:
The assigned business name needs to appear in the document exactly as it appears in the company’s Articles of Organization. The name ought to have the designator LLC, LC, or “Limited Liability Company.”
Since an LLC entity can be member-managed or manager-managed, the operating agreement must declare the adopted management structure. The individuals appointed to manage the company must also be identified and the powers awarded to them. The limitations of the members’ and managers’ authority within the LLC should be defined. Managers can be outsourced from outside the LLC members.
Ownership is a crucial aspect of any business. A list of all the LLC members should be provided together with the ownership percentage held by each member/owner. Capital contributions greatly influence ownership percentage; however, it is not uncommon to see managers having ownership percentages.
Duties of participants
Each LLC member and manager can be assigned specific duties to ensure the timely completion of projects and enhance accountability. Therefore, a Missouri LLC operating agreement needs to indicate how these duties and responsibilities are delegated and to whom.
Voting rights and responsibilities
Voting is a crucial aspect of the decision-making process of LLC companies. Each LLC member should be awarded specific voting rights to participate in decision-making. An operating agreement needs to show the voting procedure, voting rights assigned to each member, and decisions requiring the vote to be implemented. Voting rights do not have to be equal, and voting rights can be distributed based on capital contribution.
A Missouri LLC operating agreement should state how profits and losses within the LLC are shared among members. Each company can use a distribution system that suits their model; some companies base distribution on ownership percentage, although equal distributions are also standard.
Meetings are essential in ensuring operations are going smoothly within a business. Therefore, an LLC operating agreement must declare how internal meetings should be conducted by stating how often they are to be held, events that necessitate meetings, and the person assigned in organizing such meetings.
Member additions or withdrawals are situations that LLC members need to anticipate. An operating agreement is an opportunity to address the protocol for when a member has to leave due to retirement, conviction, etc., or a new member such as a new investor has to join the LLC. It should be clear how ownership and roles will be transferred to the remaining members.
New members will have to pay a specified amount and receive an ownership percentage equivalent to their contribution. Changes to the membership structure will often require a vote.
Death of a member
An operating agreement needs to plan for a case where one of the LLC members passes away. The procedure for transferring ownership to a successor such as a child or a spouse, or other members should be clearly defined to avoid legal battles after such an event.
LLC members should prepare for a situation where they have to dissolve the company. Dissolution can be due to different reasons, such as bankruptcy or any other. The operating agreement must clarify the process of dissolving a Missouri LLC.
A Missouri LLC operating agreement should have a severability clause that states that if part of the operating agreement is invalid or unenforceable, the other parts remain valid and enforceable. In addition, a severability clause helps in preparing for errors in the document.
Operating Agreement Template
LLC members can use a Missouri LLC operating agreement template to create an effective operating agreement. Templates guide users by outlining primary sections that should appear in a standard operating agreement. In addition, users can personalize the template and prepare an operating agreement that meets their specific requirements.
We have offered the readers up-to-standard Missouri LLC operating agreement templates that are downloadable for free.
How to Form an Operating Agreement?
As earlier mentioned, every LLC in Missouri must have an operating agreement. An LLC member can create an operating agreement on their own without the assistance of an attorney. This article will highlight the steps to create an effective operating agreement for an LLC in Missouri once they obtain a business name from the secretary of state.
Find a registered agent
Firstly, the LLC members should appoint a registered agent located in Missouri with a valid physical address in the state. This can be any business operating in Missouri or a person with legal residence in Missouri. A registered agent receives legal notices, state filings, service of process, or any other documentation addressed to the LLC.
Application for registration
Secondly, the LLC needs to be registered with the state. An LLC can be registered using the Articles of Organization (for domestic LLCs) or an Application of Registration and a Certificate of Existence (for foreign LLCs). Registration can be done online or via mail.
Next, the applicable filing fees should be paid to the state Corporations Division. Filing fees are $50 for online applications and $105 for mail applications for both domestic and foreign LLCs. Mail applications should be addressed to Corporations Division, PO Box 778, 600 W. Main St., Rm. 322, Jefferson City, MO 65102.
Once the application process has been finalized, the LLC operating agreement can be prepared and presented to all the members for signing. Each member should be given a copy, and a copy should be filed with company records.
To finalize the formation of the LLC, the LLC should apply for an IRS Employer Identification Number which is a requirement for tax purposes, paying employees, and applying for company credit cards.
Frequently Asked Questions
Indeed, the state of Missouri requires that all LLC businesses operating under its jurisdiction should have an operating agreement. For the LLC operating agreement to be valid, it must be created based on mutual agreement among members and needs signed by all the LLC members. However, the document is not filed with any state or government agency.
An LLC operating agreement can be created at any one point between filing the Articles of Organization and completing the formation process. However, the preferred time is usually before filing the Articles of Organization.
Absolutely. An operating agreement is an internal regulatory document. LLC members are allowed to craft their operating agreements in Missouri. However, working with an attorney is a good idea as they are more qualified to ensure the document is fully legally enforceable and consistent. Therefore, the use of LLC operating agreement templates is every day.
The state of Missouri does not dictate that LLC members use a lawyer when creating an LLC operating agreement. However, the use of a lawyer is highly encouraged to create a legal-proof operating agreement.