The Importance Of Montana LLC Operating Agreement

Are you a Montana LLC owner? Do you have an operating agreement for your LLC? While you’re not legally required to have an operating agreement but it is recommended to have one to protect your business’s operations. An operating agreement will establish your credibility as a legal entity and the agreement will clearly outline rules and expectations for the LLC members.

Montana LLC Operating Agreement

Simply put, it may be defined as a legal document that clearly outlines the operating procedures as well as ownership structure of the LLC.

There are certain topics that should be addressed in the operating agreement regardless of it being a multi-member or a single member LLC. Some of the topics might not have much impact on the day-to-day operation of a single member LLC but it is recommended to include these for legal formality. Here is a list of the topics that should be addressed in the operating agreement.

Organization: The operating agreement should specify the date of formation of LLC, members of LLC and the ownership division. If it is a multimember LLC, the ownership structure could be equal among members or various members may be assigned different ownership units.

Voting and Management: This topic should cover whether there will be an appointed manager or the members will manage the affairs of the LLC. This topic should also cover how the members are going to vote on various business matters. Generally, one vote is given to each member but if needed, some members might be granted more voting power as compared to others. Click here to go through our Member Managed vs Manager Managed Guide to learn more about managing your LLC.

Contribution of Capital: It should specify how much money each member has contributed or invested in the business. This topic should also cover how you plan to raise additional funds for the business in the future.

Distribution: This topic should cover the division of profits and losses among members. Generally, profits are divided evenly among members but if needed, division could be done in a different manner and this part should be covered in the operating agreement. Click here to check our Contributions and Distributions Guide to know more about LLC ownership basics.

Membership Structure Changes: This topic should cover the transfer of roles and ownership in case a member decides to leave the company. The LLC’s governing document should clearly outline the process of replacing and/or buying out a member.

Dissolution: There might come a time when the members decide that they do not want to conduct any business and the LLC should be officially dissolved. It is important to include the way to dissolve your business in the operating agreement. Click here to go to our Montana LLC dissolution article to learn more about dissolving your Montana LLC.

 

Montana LLC Operating Agreement

The Importance of a Montana LLC Operating Agreement

It is important to have an operating agreement for your LLC regardless of the type. Here are a few reasons why it’s important.

The state recommends it. As per Montana code section 35–8–109, the members of a Montana LLC are free to enter into an operating agreement in order to decide how the affairs of the company would be regulated.

It’s a legal document that is designed to avoid conflict among the business partners. In case of a multimember LLC, an operating agreement will help in preventing any misunderstandings among the members as it will clearly set expectations about the responsibilities and role of each partner.

It will help in preserving your limited liability status. If you have created a single member LLC in Montana and you are the sole owner, an operating agreement will make sure that court officials uphold your limited liability status and it will also add to your business’s credibility.

We have partnered with a business attorney for creating free templates of an operating agreement and also a tool for creating a customized operating agreement. Click here to get a free business center account.

What is Included in the Sample Templates?

Operating agreement for single member LLC
Operating agreement for multimember LLC that is member managed
Operating agreement for multimember LLC that is manager managed.

Process after Creating the Montana LLC Operating Agreement

There is no need for you to file the operating agreement with the state once the operating agreement has been created. You can keep it for your own records and don’t forget to give copies of the operating agreement to the LLC members.

It is recommended to thoroughly review and if needed, update the operating agreement in case of any major company event such as the addition or loss of a member. The amendments to the operating agreement will need to be approved by some or all of the members as per the terms outlined in the operating agreement.

FAQ

Is an operating agreement really needed?

It’s important to have an operating agreement for your LLC. Even though this document does not need to be filed with the state but once you have an operating agreement, it will allow you to maintain better control of your Montana LLC if there are changes or chaos.

What is the right time to create the operating agreement?

It is recommended to have an operating agreement in place before filing of Articles of Organization but it can also be created after the completion of formation process. It is important to keep in mind that an operating agreement might be required by some banks for opening a business bank account with them.

Does the state requires filing of operating agreement?

It is not a requirement and the LLC members should retain the operating agreements. You do not need to file it with the Montana Secretary of State.

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