LLCs are separate entities that are treated much like persons.  But LLCs without real people behind them are just empty shells that will never transact any business. When people get behind LLCs, the fate of the LLC and of the people involved gets more complicated and unpredictable. The operating agreement is an internal document that defines the internal structure of the business and does not need to be filed with the Secretary of State. Broadly speaking, an operating agreement can have some of the following benefits:

First, it makes running the business more predictable in that it defines the relationships between the members and managers. Thus, roles are defined in writing and there is no confusion as to whom gets profits, who gets salaries, who gets to vote on the business decisions, etc. This avoids those seat-of-the-pants decisions that likely create tension between people.

Second, adopting an operating agreement will force you to learn some tried-and-tested patterns of corporate practice. In other words, you don’t have to reinvent the wheel. This agreement will act like a business lesson and will help you anticipate the issues that may arise in the future. For example, it will force you to think about the process of adopting a business decision when others disagree with a course of action you contemplate.

Third, an operating agreement is a good way to attract talent and investments. Investors will inject money into your operation only if they see a possibility of return on their investment. They will feel more confident in funding your business when the business runs on a solid foundation. While talented individuals may not care too much about corporate structure or maybe not even compensation, they will care about other perks that cost money such as health benefits or manageable work hours.

These reasons cover in very broad strokes the reasons why you should seriously consider adopting an operating agreement for your LLC. An attorney with both transactional and litigation experience can be a very valuable resource in making sure that your operating agreement will serve your business well in the long haul.

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