What is an Arkansas LLC operating agreement?
An operating agreement is a regulatory document for an LLC which outlines the governing structure and operating guidelines of the entity along with the responsibilities of the members.
An operating agreement may also be referred to as a membership agreement.
Is the operating agreement the same as the Articles of Organization?
No. The Articles of Organization are a formation document that is used to create the business entity with the Arkansas Secretary of State. The operating agreement is an internal document that outlines the governing structure and operating guidelines of the entity along with the responsibilities of the members.
Related: How to form an LLC in Arkansas
Is an operating agreement required in Arkansas?
Arkansas Statutes, Section 805 ILCS 180, states that every Arkansas LLC may adopt an operating agreement, but it isn’t required. Despite it not being required, there are several reasons it is recommended to have one.
Currently, only six states require an operating agreement – California, Delaware, Maine, Missouri, Nebraska, and New York.
Related – When does an LLC need an Operating Agreement?
Why is an operating agreement important?
There are a number of reasons why the operating agreement is important. A few of which include:
- In the event of a legal dispute, an LLC without an operating agreement may have to follow generic state rules which may not negatively impact the member’s personal asset protection.
- The roles, responsibilities, and expectations of the members are in writing which will reduce future conflicts.
- As a single-member LLC, having an operating agreement may help to better protect the entity’s limited liability status.
- When applying for financing, a lender will often want to see one before opening a business bank account to ensure the members have the authority to borrow on behalf of the entity.
- Potential investors and partners will request one when evaluating a business.
What should be included in an operating agreement?
An operating agreement can be as structured or unstructured as the members deem necessary. Some elements to consider putting in an operating agreement include:
- Business information such as the name of the LLC, principal office address, purpose of the business, duration of the LLC, etc.
- Name and address of the registered agent
- Capital contributions of the members
- Management – member-managed vs member-managed
- Scope of the manager’s authority
- Entity tax election
- Roles of the members (including financial authority, signing contracts, etc)
- Names of the members and their membership interest
- When and how members receive compensation and distributions
- Meeting information and voting rights
- Procedures for adding or removing a member
- Process of dissolving the LLC
Where is an operating agreement filed?
The operating agreement isn’t filed with the state. A signed copy should be kept where the company records are stored in addition to each LLC member having one as well.
Arkansas LLC Operating Agreement Template
Below we have a downloadable Arkansas LLC operating agreement template in both Word and PDF formats. Please note this is a general template and has not been reviewed by an attorney. It is recommended that you have it reviewed by an attorney before using.
These companies help create a custom operating agreement by asking questions that are relevant to your state and business to ensure an agreement that best protects you and your business. Plus, you get access to their entire library of custom business forms, contracts, and other important documents.