Many states do not legally require you to have LLC agreements when you form a Limited Liability Company. But if there is no agreement, default state laws will apply. The agreement can be used to clearly specify the operating mechanism and rights and responsibilities of each co-owner. Each owner has a percentage ownership and a specified share of the profits and losses. These aspects can be spelled out in the LLC agreement. It may also include a detailed section on what happens if one of the owners leaves.
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Most of these details are included in the agreement to supersede default state laws reading LLC operation and ownership rules. For example, an LLC with two members will divide the profits 50-50 by default even if one member has a bigger percentage ownership. This can be rectified by clearly specifying how much profit share each member should get.
Do you have legal questions regarding LLC agreements and business law? Our business law attorneys can help. Contact a business lawyer in your area today to learn more about how you can receive legal representation regarding LLC agreements and your business.
Did you know?
An LLC is a pass-thru tax entity.
There is no double taxation for LLC owners. The business is not taxed and the profits and losses are reported by owners on their personal tax returns.