A Utah LLC Operating Agreement is a document that offers company members the full details of the management structure and details of the company’s operating procedures of any size.
Information like management roles, employees, capital investments, and other relevant company details are some of the areas addressed in the Utah LLC operating agreement. Furthermore, the legal document offers the members the much-needed protection for legal issues if they arise.
Although the Utah LLC operating agreement is not mandated by the state for conducting business, but it is best to have this legal document as it ensures that the company is ready for any form of litigation. Also, due to the implementation of this document, each member’s assets will remain intact even when they leave the company. Plus, the company can leverage tax options when the document has been filed.
The Utah LLC operating agreement has supporting laws that further reinstate the credibility of the document, under the Utah Revised Uniform Limited Liability Company Act of Title 48, Chapter 3A. Also, Operating Agreement Laws §48-3a-112 and State Definition §48-3a-102(16) are part of the supporting laws for a Utah LLC operating agreement.
This guide will explain the importance of having a Utah LLC operating agreement and relevant information for business owners looking to solidify their business operations.
Operating Agreement Template
An LLC Operating Agreement is a crucial document that outlines the internal operations, management structure, and ownership rights of a limited liability company. Crafting a comprehensive operating agreement is essential for establishing clear guidelines and protecting the interests of all LLC members. Our pre-built templates offer you the convenience of a professionally designed document, saving you time and effort. With our free downloads, you can ensure a solid foundation for your LLC in Utah, promoting transparency and minimizing potential disputes.
Why an Operating Agreement?
According to Utah Code Section 48-3a-102(16), as a business owner, you need to enter into this agreement to regulate the internal affairs of your company or business. Secondly, since the Utah LLC operating agreement outlines all the necessary information of how the business is meant to run, there will be a reduction in conflicts among managing members.
Another reason for creating an LLC operating agreement in Utah is that the document helps preserve your limited liability status. For sole owners of an LLC in Utah, the operating agreement shows court officials, investors, banks, and other authorities that you are credible, with clearly defined procedures.
Importance of Operating Agreement
A Utah LLC operating agreement is an essential part of the company as it ensures your credibility as a business, with authorities being able to see the management structure and the mode of operations.
Another important feature that the Utah LLC operating agreement adds to your business is being able to formalize a verbal agreement with other members of the company. More importantly, the presence of the Utah LLC operating agreement shows professionalism to all parties involved in your business.
Also, with the Utah LLC operating agreement, your business is free from state interference. As a result of the implementation of the LLC operating agreement in Utah, your business will not fall under the jurisdiction of default laws of the state.
Finally, it is only normal that you and some other members of the company may agree on every issue. Therefore, the operating agreement serves to reduce conflicts with clearly defined instructions on how the internal affairs of the business should be upheld.
Information to be Included
Here is some of the information you can include in the Utah LLC operating agreement:
Company information
It is best to start with information about your company the same as what was provided on the Certificate of Organization, which you or another member of the company filed with the Utah Department of Commerce Division of Corporations Commercial code.
The company information should consist of the name and address of your LLC, the duration of your LLC, Utah registered agent credentials, and the full names and addresses of your members.
Ownership
This is where you state how much ownership the members of your company will have. Some LLCs divide equally to all members while others share ownership based on the capital investment of each member. It is essential that the decision should be clear and adequately documented in the LLC agreement to avoid confusion.
Duties of members
With members of your company having different roles and responsibilities, it is important to have a clear description of each member’s roles to avoid confusion and conflict. Therefore, document the requirements for each role, the people that can appoint a manager, and what decision these managers can take. Furthermore, you should include the matters that need members’ approval.
Management structure
We have earlier explained the disparity between manager-managed and member-managed. Therefore, for effectiveness in the company, the management structure has to be clearly defined. Then, also, there can be instructions on how to go about policy change.
Voting rights and responsibilities
Some situations require the need for a voting exercise to be carried out in the company. Therefore, you need to ensure that the appropriate measures that members have to take in this eventuality are documented. Each member’s voting power has to be described.
Do members have power based on their capital contributions? Are the votes automatically be considered one for each member? Whatever the voting structure is, it is most important to have it written in the Utah LLC operating agreement.
Contributions
The Utah LLC Operating agreement needs to have a well-documented report of the contributions that have come in. It should also show how these contributions have been spent and where they came from.
Distribution of profits
There needs to be a clear explanation as to how the profits are calculated, the details of the distribution process also need to be in the operating agreement. In addition, you should specify how often and what methods the profits will be distributed among the members of the company.
You and the members have the liberty of dividing the profits any way you want as long as every other member is in agreement with the method.
Taxation
You need to record the type of taxation structure that applies to your company. For example, suppose you operate a single member Utah LLC operating agreement, then you will be taxed by the IRS. However, for multi-member Utah LLC operating agreements, the taxation structure is based on partnership or a C Corporation.
Succession planning
If a member dies or leaves the company, there needs to be a provision that instructs other members on the next step. The succession plan should also detail how the ownership stakes will be distributed when a member is no longer around.
It would help if you asked yourself some important questions when looking at executing succession planning. These questions include, will the successor have the same rights and responsibilities as the member that is no longer in the company? In what ways are the ownership interests paid?
Dissolution
No one wishes for the closure of any business, but if this happens, there needs to be a laid out set of instructions that offer a solution to the dilemma. This is to avoid personal responsibility to creditors when the debts and obligations of the company need to be paid.
Severability clause
In straightforward terms, this clause means that if there is an error in the entirety of the operating agreement, that mistake does not render the agreement null and void.
Types LLC Operating Agreement
There are two types of Utah LLC Operating Agreement, Multi-member LLC operating agreement and Single Member LLC Operating Agreement.
Single member Utah LLC operating agreement
A Single-member Utah LLC operating agreement is used when only one managing member is present in the company.
Download: Microsoft Word (.docx)
Multi-member Utah LLC operating agreement
For the Multi-member Utah LLC operating agreement, the document is required when more than one managing member is present in the company.
Download: Microsoft Word (.docx)
LLC Registration Process
In Utah, there are some specifications that you need to be sure of when registering your company. For instance, you need to ensure that no other company is registered the same way in Utah.
Also, in the registration process, you need to add the term Limited Liability Company or LLC under the Utah Law.
Words requiring an external certification because they are restructured, such as Bank, University, and Attorney.
It is also crucial that you don’t have a name that ties you to any Government authority in Utah. Most business owners reserve a domain name so that it does not get stolen during the registration process. In Utah, the reservation fee is $22. After filling out the reservation form, you can send it to Utah’s Division of Corporations.
There are some prohibited words such as Secret Service, Treasury, and FBI that should not be used.
How to Form Operating Agreement?
A Utah LLC operating agreement is important in the internal affairs of a company; therefore, properly forming this document can increase the chances of a business achieving great success.
Agent
As an LLC in Utah, you have to designate a registered agent to receive service of process and government notices on your company’s behalf. More importantly, the registered agent has to be someone who resides in the state of Utah, or they could be a qualified business that operates in Utah.
Type of LLC
The domestic LLC is designated for LLCs found within Utah and the Foreign LLC, which is formed outside of the jurisdiction. Therefore, you need to be sure which LLC needs to be taken into consideration before filling out the form.
Complete the application
For domestic LLC, you can file the Certificate of Organization either online or paper medium. However, for Foreign LLC, the foreign registration statement has to be presented.
Filing fee
You need to pay a $70 filing fee to complete the application. This fee can be paid via credit card (online) or with a cheque to the “State of Utah”. If you use mail for the filing process, then attach all the relevant articles and send them to the following address,
Utah Division of Corporations and Commercial Code, P.O. Box 146705, Salt Lake City, Utah 84114-6705
Operating agreement
This is a legal document with different purposes which business owners can use to provide relevant insight into the multi-purpose document highlighting meeting times, responsibilities of members and managers, finances, and investments of members among other aspects of the business.
An operating agreement has two parts which are single-member LLC operating agreement and a multi-member LLC Operating Agreement.
EIN
Employer Identification Number should be gotten after you have filed your LLC with Utah or the state of your choice. It is an identifier that has more or less the same function as a Social Security Number. EIN is used for reporting tax information to the Internal Revenue Service. You can submit an Adobe PDF form SS-4 via mail or complete the application online.
Frequently Asked Questions
There is no legal obligation for you to have an operating agreement in Utah as an LLC. However, it is best for your business as it enhances your credibility with banks and investors.
It would be best for you to create an operating agreement before you fill the certificate of Organization.
An LLC does not file an operating agreement with the state; instead, it is kept where all the company records are stored. Furthermore, each member needs to have a copy of the operating agreement.
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