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Operating Agreement Questions

Operating agreements are placed within the LLC as a form of clarifications that govern the company. This agreement explains the duties of the company and who is appointed to these duties. Usually all aspects of operation within the company are listed in the agreement. This would pertain to the management, financial, buy out of members, voting, and ownership percentages. Every LLC varies with the information within an agreement. Below are a few of the more commonly asked questions regarding an operating agreement.

The operating agreement with the partner in our corporation (it is a 50/50 split) says there must be a majority rule to decide on issues that arise. It seems never to be a majority as each set of partners stick together on their decisions, making majority impossible. How is a tie breaker achieved?

This is typical of many situations in the boardroom. Those who want a vote to pass will gather together to achieve a majority vote. If no bylaws are violated, there is generally nothing that can be done about a majority vote. If your company bylaw doesn't discuss how to proceed with a tie vote, you will probably have to let a judge determine how the vote will go. If this is an ongoing problem, you may consider amending your company bylaws to include an action that pertains to breaking a tie. This will avoid repeat visits to the courts to assist in settling a dispute amongst partners. If the bylaws are not amended to handle the outcome of tie breaks, you will be spending a lot of time and money with court appearances.

Our company doesn't have an operating agreement. One of the members agreed to leave the LLC for a payment and a non-compete agreement. He took half the money and signed a document that was sent to the Secretary of State stating that he was no longer a member. A few days later, the member refused to sign the non-compete agreement and is now trying to sue me. He says that he never agreed to leave the company and it should be dissolved. What rights do I have?

If you have been summoned to court, the first thing you should do is answer the complaint with your denial and explain that the partner chose to leave the business (voluntary dissociation). You will have evidence of the partner's willingness to leave from his signature on the document that was sent to the Secretary of State. There is also the matter of the partner accepting his asset from the company. This will back your claim that the partner dissociated himself from the company. You will have to validate all evidence to show the partner chose to leave the business. If you win the case, you may consider taking the partner to court for wrongful institution of civil proceedings, for attempting to sue you when he chose to leave on his own.

Can a LLC operating agreement be used to distinguish between owners, investors, and manager?

You can use the operating agreement to distinguish between the owner, investor, and the manager as well as list the duties of each one. Anything that you agree on that pertains to the LLC can be listed in the operating agreement. This includes the voting forum; buy outs, removal of members, operating procedures, and ownership percentages.

In Colorado, how do I file an operating agreement for an LLC, receive a federal EIN and purchase a corporate seal?

Generally, everything that you need to do can be done online. First step is to ensure that your business name is available through the state of Colorado. You can check for that information here:
http://www.sos.state.co.us/biz/FileDocNameAvailCriteria.do;jsessionid=0000bmw6_i32XCOS0ZlQRBQbX4L:11nm0gcsc?transTyp=ARTORG_LLC

You can also apply for your EIN (employer identification number) online. Once you have established your LLC, you can go here to apply for your EIN:
http://www.sos.state.co.us/biz/FileDocNameAvailCriteria.do;jsessionid=0000bmw6_i32XCOS0ZlQRBQbX4L:11nm0gcsc?transTyp=ARTORG_LLC

The state and federal government doesn't create your corporate seal. This is something that you will design and have a stationary shop create. To learn more about this topic please read here:
http://www.ehow.com/how_5586043_obtain-corporate-seal-corporation.html

Operating agreements are legal documents that discuss the general management operations within an LLC. The agreement is a valuable tool when dealing with multiple partners. Many questions stem from this topic and many people rely on Experts to answer their questions. If you have questions regarding an operating agreement, you should speak with an Expert who can answer your questions and offer legal insight to your individual situation.
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