Starting a new business in New York can be a busy time in anyone’s life. Before opening a business, you typically need ideas, capital and a space to work. Another critical step in this state is creating an operating agreement for your limited liability company. An operating agreement officially establishes your business and clarifies this company’s terms.
Is an operating agreement required in New York?
Yes, New York requires a business owner to complete an operating agreement before legally operating a new venture. In some states, business owners don’t have to complete operating agreements. The states not requiring operating agreements typically divide profits and losses equally between partners.
The contents of operating agreements
Operating agreements cover many aspects of a company’s internal operations. These agreements can also be vital when a company faces business & commercial law issues. While no two companies are the same, most limited liability company (LLC) operating agreements include the following information:
- Who owns this new venture
- Ownership shares of each business owner
- The responsibilities of business leaders
- How companies distribute losses and gains
- Business voting responsibilities
- Buy-sell and buyout rules
Besides it being a requirement, creating an LLC operating agreement also establishes a legal boundary between you and your new venture. With most business owners choosing LLCs to keep business and personal interests separate, creating an operating agreement helps them avoid losing their personal assets if their companies face lawsuits.
It can be daunting to learn you must draft an operating agreement to open a business. However, this process lets you conduct important business research and helps set your new venture up for success.