The Importance Of An Operating Agreement LLC Hawaii
When it comes to owning an LLC in Hawaii, every owner should have an operating agreement drafted to ensure that their business remains protected. While these are not required by the state, an operating agreement stands to illustrate a set of clear expectations and rules to establish the entity as legal. This guide ensures that business owners have everything they need to properly understand the operating agreement.
What Is A Hawaii LLC Operating Agreement?
Simply put, the operating agreement of business clearly outlines the operating procedures and the structure of the Hawaii LLC. When it comes to starting a multi-member, or even a single-member LLC, an operating agreement aims to clarify the following issues:
* Organization – Indicates the formation date, it states who the members are, and it even illustrates how the ownership is divided. For multi-member entities, members are usually assigned various percentages of ownership.
* Voting And Management – The operating agreement states who manages the LLC as well as how voting will take place. While each member is allowed one vote, some members are offered more say.
* Capital Contributions – The monetary contribution that each member has invested into the LLC is stated as well as how they plan to generate additional funds.
* Distribution – Both profits and losses can be divided equally for LLC members. However, if members agree to divide differently, this is indicated in details in the operating agreement.
* Membership Structural Changes – States how ownership will be transferred if members decide to leave or buy out another member.
* Dissolution – If for some reason the LLC falls apart, it should be dissolved. Hence, a dissolution outline should be drafted into the operating agreement.
Why Should I Have A Hawaii LLC Operating Agreement?
Without a thought, LLCs in Hawaii should have their designated operating agreement. The following indicates why this is important:
* When compared to other documents, this one, in particular, is of importance since the state recommends it. Hence, all members should enter into the agreement to properly internalize the LLC’s affairs.
* Operating agreements tend to prevent problems and conflicts among members. In essence, they prevent misunderstandings and state clear expectations as it pertains to each member’s responsibilities and roles.
* To preserve the LLC status, single-owners are required to file for operating agreements since credibility is upheld in the court.
Types Of Operating Agreement In Hawaii
* Single-Member Operating Agreement – These are better suited for LLC’s that are formed by one person only
* Multi-Member Operating Agreement For Member Managed Corporation – This type of agreement is used by LLC’s that have multiple members who wish to manage the corporation jointly.
* Multi-Member Operating Agreement For Manager Managed Corporation – Manager managed LLC’s benefit from this type of operating agreement especially if they want multiple or one manager to deal with the company’s daily affairs.
After Creating A Hawaii LLC Operating Agreement
After the operating agreement has been created, it should be kept for record purposes. However, copies should be given to members within the LLC. If ever members leave or are added, it’s in the LLC’s best interest to ensure that the policy is updated. In some instances, all members are required to sign in order for the document to be approved by the LLC.
Frequently Asked LLC Question
Do I really need an operating agreement?
Simply put, an operating agreement is a must-have. While these documents are never filed with the state, it’s always a great idea to ensure that one is drafted. This protects the business and ensures that control is maintained if ever there is chaos.
When should I create my operating agreement?
While most often indicate that it is a relatively good idea to draft an agreement before the Articles of Organization is filed, there is still no clear cut reason why this cannot be done even after the LLC is formed. However, some banks tend to require clients to submit operating agreements before they can open their business accounts.
Should my operating agreement be filed with the state?
No, there is no rule which states that operating agreements need to be filed with the state. These agreements should be kept by the members. As such, there is no need to submit this document to the Commerce and Consumer Affairs division.