Starting your own business can be an exciting and rewarding experience, but it can also be overwhelming at times. There are countless decisions to make and legal documents to prepare. One of the key documents every LLC in Arizona needs is an operating agreement. This agreement outlines the rules and regulations of your LLC and serves as a guide for running your business. In this article, we will discuss the Arizona LLC default operating agreement and what you need to know about it.
What is an Operating Agreement?
An operating agreement is a legal document that outlines how your LLC will be operated. It sets out the rules governing the management of your business, including the rights and responsibilities of each member. An operating agreement is not required by law in Arizona, but it is highly recommended. Having an operating agreement in place can help avoid conflicts between members, establish clear expectations, and protect your business from legal disputes.
Default Operating Agreement in Arizona
If you do not create your own operating agreement, the Arizona default operating agreement will govern your LLC. This default agreement is outlined in Arizona Revised Statutes Section 29-682. The default agreement covers several areas, including the management of the LLC, distribution of profits and losses, and member voting rights.
The default agreement for Arizona LLCs establishes that they are “member-managed.” This means that all members have an equal say in the management of the business. Alternatively, an LLC can be “manager-managed,” which means that one or more designated managers handle the day-to-day management while members have a more passive role.
The default agreement also establishes that each member`s profit and loss share is proportional to the member`s percentage of LLC ownership. This means that if you own 50% of the LLC, you are entitled to 50% of the profits and losses.
In terms of voting rights, the default agreement for an Arizona LLC establishes that all members have an equal vote, regardless of their ownership percentage. This is different from some other states where voting rights are based on ownership percentage.
Modifying the Default Operating Agreement
Even though the default operating agreement covers the essentials, it may not be tailored to your LLC`s unique needs. You may need to modify the agreement to better suit your business. Modifications can be made at any time by following the procedures outlined in the agreement.
If you decide to modify the default operating agreement, it is recommended to seek the advice of an attorney. An attorney can help ensure that the modifications are legally valid and that they protect your interests.
Conclusion
In conclusion, an operating agreement is an essential document for your LLC in Arizona. If you do not create your own agreement, the default operating agreement will govern your LLC. While the default agreement covers the essentials, you may need to modify it to better suit your business`s needs. It is recommended to seek the advice of an attorney when modifying the agreement to ensure that the modifications are legally valid and protect your interests.