Des Moines Operating Agreement Lawyer

At Herting Law, we understand that running a business involves making critical decisions, many of which will have long-term legal implications. One of the most important steps you can take as a business owner is to create a well-drafted operating agreement. This document is more than just a formality—it’s a legally binding contract that governs the way your business operates. For companies in Iowa, particularly Limited Liability Companies (LLCs), operating agreements are not just a safeguard but an essential part of business planning. Learn more here about the function of an operating agreement and how a Des Moines business lawyer from Herting Law can help ensure your business is protected.

What is an Operating Agreement?

An operating agreement is a legal document that outlines the management structure of an LLC, including the responsibilities of its members and the way important business decisions will be made. It also sets the rules for day-to-day operations and helps clarify what happens in different scenarios, such as what to do if a member wants to leave the business, how profits and losses are shared, and how disputes between members will be handled.

While Iowa doesn’t legally require LLCs to have an operating agreement, it is highly recommended. Without one, the business will be governed by Iowa’s default LLC laws, which may not always align with the specific needs or intentions of the business owners. A customized operating agreement ensures that your business functions according to your plans and preferences, rather than default rules that may lead to unintended consequences.

The Purpose of an Operating Agreement

The primary purpose of an operating agreement is to provide clarity and structure within a business. When there are multiple members involved, an operating agreement can prevent disputes by clearly defining the roles and expectations of each member. For single-member LLCs, while disputes between members aren’t a concern, the agreement still plays a crucial role by formalizing how the business is run and protecting the owner’s personal liability.

Operating agreements also serve to protect the limited liability status of the LLC. In the absence of an operating agreement, the company might appear more like a sole proprietorship or partnership, potentially exposing the owners to greater personal liability. By clearly separating the business as a legal entity distinct from its owners, an operating agreement can help safeguard personal assets from business debts or legal actions against the company.

In some cases, financial institutions may also require an operating agreement to open a business account or secure financing. A well-constructed operating agreement demonstrates that your business is structured and organized, which can improve its credibility with banks, investors, and other parties.

Types of Operating Agreements

Operating agreements can be tailored to fit the unique needs of your business, and there are several different types depending on the structure of your company. For example:

• Single-Member LLC Operating Agreement: This type is designed for LLCs with just one owner. Although it might seem unnecessary, even single-member LLCs benefit from having a formal operating agreement in place. It ensures that the LLC remains legally separate from the owner, which helps protect personal assets.
• Multi-Member LLC Operating Agreement: For LLCs with more than one member, this agreement outlines the roles, voting rights, and ownership percentages of each member. It also includes provisions for how to resolve conflicts, what happens if a member leaves, and the process for bringing on new members.
• Manager-Managed Operating Agreement: In this type of agreement, the LLC members choose to appoint a manager or group of managers to handle the day-to-day operations of the business. This can be helpful for companies where the members want to take a more passive role and leave management to professionals or specific individuals.
• Member-Managed Operating Agreement: In a member-managed LLC, the members of the LLC take an active role in managing the business. This type of agreement details the responsibilities of each member and how decisions will be made collaboratively.

Every operating agreement can—and should—be customized to suit the specific needs and goals of the business. Working with an experienced business lawyer ensures that your operating agreement is both comprehensive and tailored to your unique situation.

Contact an Iowa Operating Agreement Lawyer

Don’t attempt to draft an operating agreement without a skilled business lawyer in your corner. Herting Law, PLLC has effectively represented business owners for years, and we stand ready to do the same for you. Contact our firm today.