As your small business grows and evolves, the rules that govern it might need a refresh too. In Delaware, that rulebook is your Limited Liability Company (LLC) Operating Agreement. The good news is, that updating this document is usually straightforward and rarely requires filing with the state.
What is an Operating Agreement?
Think of your Operating Agreement as the constitution for your LLC. It outlines everything from how decisions are made and profits are split to procedures for adding or removing members. It’s a crucial document and a flexible one.
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Why Change Your Operating Agreement?
There are several reasons you might want to amend your Operating Agreement:
- Membership Changes: If someone joins or leaves your LLC, you’ll need to update your agreement to reflect their ownership stake (or lack thereof).
- Management Structure: If you decide to switch from member-managed to manager-managed (or vice versa), you’ll need to revise your agreement accordingly.
- Profit/Loss Allocation: If you want to change how profits and losses are distributed among members, your Operating Agreement must reflect that.
- Business Expansion: If your business activities expand, your Operating Agreement may need to be updated to include these new activities.
How to Change Your Operating Agreement
- Review Your Existing Agreement: Most Operating Agreements have a section outlining the amendment process. Typically, it requires a vote of the members.
- Draft the Amendment: Specify the changes you want to make. Be as detailed as possible. You might want to consult an attorney to ensure everything is legally sound.
- Hold a Vote: Follow the voting procedure outlined in your Operating Agreement.
- Sign the Amendment: All members should sign and date the amendment.
- Keep a Copy: Store the amended Operating Agreement with other important business documents.
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Do I Need to File with the State?
Generally, no. Delaware doesn’t require you to file amended Operating Agreements with the Division of Corporations. However, it’s crucial to keep your records up-to-date for internal purposes.
Disclaimer: This article provides a general overview and should not be taken as legal advice. Consult with a legal professional for advice tailored to your specific situation.
