An operating agreement protects your limited liability company (LLC) from lawsuits or other liabilities. A well-written operating agreement establishes your credibility as a legal entity. And free templates are available online to help you draft a simple Utah operating agreement.
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What Is an Operating Agreement for a Utah LLC?
An Operating Agreement is a legal contract that outlines the basic rules of operation of your Utah limited liability company. This includes how much money each owner contributes to the company, how often you meet, and how decisions are made. If you don’t have one, you’re missing out.
A Utah Limited Liability Company (LLC) is a great way to start a small business because it allows you to limit your personal liability while protecting your assets. However, there is no such thing as too little information about setting up your LLC. You’ll find that most states require you to file certain documents with the state government, including an Operating Agreement. These documents vary based on the type of business entity you choose. For example, if you choose a Utah LLC, you must complete several forms and pay fees to form your company.
Utah LLC Operating Agreements are typically three to four pages long and include sections like:
• Purpose – What does your LLC do?
• Members – Who owns your LLC?
• Manager(s) – How do you make decisions?
• Duties of officers – What responsibilities do you give to your managers?
What is the purpose of an operating agreement for a Utah LLC?
An operating agreement is a document that governs how a limited liability company operates. In short, it protects owners from lawsuits against the company. If there are no agreements, members could sue each other for mismanagement or fraud. This is why having one is essential.
A Utah LLC needs an operating agreement if it wants to operate legally. The state requires that every LLC file an operating agreement within 30 days of formation. You can find sample operating agreements online or download a form from the Secretary of State’s office.
Is a Utah operating agreement necessary?
An operating agreement is not required under Utah law. However, it can help protect your business if things go wrong. Here are some reasons why you might want one.
1. Avoiding Litigation
If you don’t have an operating agreement, someone could sue your company without knowing what your company really does. If there is no written agreement about how your company operates, it becomes very difficult to prove exactly what happened. This makes it harder to defend yourself against claims of fraud, negligence, breach of contract, or even theft.
2. Protecting Your Company’s Assets
In addition to protecting your company from lawsuits, an operating agreement protects your company’s assets. For example, if your company owns real estate, an operating agreement defines how much money each partner gets paid out of profits. Without an operating agreement, one person could claim that he/she deserves more than his/her fair share of the company’s assets.
3. Defining How You’re Going To Be Paid
Another benefit of an operating agreement is defining how you’ll be paid. When you sign a partnership agreement, you must specify whether you will receive compensation based on profit, salary, equity, or some combination of those options. By signing an operating agreement, you define how you’ll be compensated.
What is a Utah LLC Operating Agreement composed of?
An operating agreement is like a contractual agreement between LLC or limited liability company members. It describes how the company will operate and each owner’s responsibilities and includes provisions that cannot be contained within an operating agreement.
Utah LLCs are formed under the Utah Limited Liability Company Act. To form an LLC in Utah, you must file Articles of Organization with the Secretary of State. These articles constitute the “operating agreement.”
The operating agreement must contain certain provisions. For example, it must state whether the company is taxed as a corporation, partnership, or S-Corp; name the manager(s); define the term of the company; set forth the purpose of the company; provide information regarding the company’s capitalization; describe the powers of directors; list the names, addresses, and occupations of the members; specify the duties of managers; designate officers; provide for the payment of expenses, and make provisions for the dissolution of the company.
The purpose of an operating agreement is to define how the company will run. If you have just formed a limited liability company (LLC), it’s essential to understand what happens next. You must sign an operating agreement that defines the responsibilities of each party and outlines the terms of ownership.
An operating agreement is similar to a contract. Some people call it a contract. But unlike a typical contract, an operating agreement is often used to govern the day-to-day operations of a company.
This free operating agreement template is designed specifically for an LLC with only 1 member. If you have additional partners, you will want to consider revising the document to include those parties.
A few things to note about this template:
1. Each section is labeled with a number. These numbers correspond to the numbered sections of the form.
2. Each section includes a heading and blank lines for you to fill in the information.
3. All capitalized words are defined within the text.
Frequently Asked Questions
Can I write my operating agreement?
You might think it’s easy enough just to start writing down what you want your contract to say. But there are a lot of things you need to consider. For example, how much money do you make per month? How many employees does your business have? What are your assets worth? Is your business incorporated or unincorporated? Do you want to protect yourself against lawsuits? And what about taxes?
While using an attorney is the best way to go, the free operating agreements from the providers above will be a good starting place to build upon. You can always ask your attorney to review your draft once you’ve finished creating it.
How Much Does it Cost to Form an LLC in Utah?
The cost to form an LLC varies depending on where you live and what type of entity you want to start up. In Utah, there are no filing fees associated with forming an LLC. However, you must pay a $70 fee to register the business with the Secretary of State’s office. You also need to pay an additional $20 fee to reserve the name of your business. This allows you to use the name without paying another fee later.
Utah does require a $22 fee to create an LLC. You can do this online or via snail mail. Once completed, you will receive a certificate of formation.
James Rourke is a business and legal writer. He has written extensively on subjects such as contract law, company law, and intellectual property. His work has been featured in publications such as The Times, The Guardian, and Forbes. When he’s not writing, James enjoys spending time with his family and playing golf.
