It can be tough to get started when drafting an Operating Agreement. Learn what you need to address in the document by calling StartPack today!

Choosing a business model is an important part of starting a successful empire. If you want to start your business fast, you can opt to establish a Limited Liability Company or an LLC. 

 

Most businesses choose to establish LLCs for two main reasons. LLCs offer businesses a form of protection against personal liability. They also prevent double taxation that corporations experience.

 

In Wyoming, when you’re creating an LLC, you need to register your business with the state. But, this may not be enough to protect your business. 

 

This is why you should also draft an Operating Agreement when you register your business. Read on to know the benefits of an Operating Agreement and how to create one for your LLC in Wyoming.

An Overview of Wyoming LLC

A Limited Liability Company (LLC) provides limited liability to its owners or members. LLCs have a pass-through tax format by default. 

 

This means that an LLC does not pay taxes through its own income. Instead, tax deductions are passed through to the owners, who report taxes on their personal tax returns.

 

In Wyoming, you need to complete five steps to establish an LLC.

 

1. Name your business.

The first step in creating an LLC is deciding on a business name. When doing this, you need to choose a name that adheres to Wyoming naming requirements. 

 

When you’re naming your company, be sure to remember the following key points:

 

• Your name must have the phrase “limited liability company” or “LLC” on it. 
• Don’t include words or abbreviations that may confuse your LLC with an existing government agency, like the words FBI, State Department, or Treasury.
• You must remember that restricted words, like “bank,” “university,” and “attorney,” may require you to file additional paperwork.
• Choose a name that can be easily distinguished from any existing corporation, limited liability company (LLC), limited liability partnership (LLP), or limited partnership (LP) in Wyoming.

 

2. Select a registered agent.

In Wyoming, the Secretary of State requires businesses to have and maintain a registered agent. This is an individual or a business entity that handles legal documents for your business. 

 

3. File the necessary documents with the state.

After finding a registered agent, you can file your Articles of Organization with the Secretary of State. This is also the best time to determine whether your LLC will be member-managed or manager-managed.

 

4. Draft an Operating Agreement.

You’ll need to create an Operating Agreement that lists the ownership and operating procedures of your business. Although Wyoming isn’t one of the states that require this document, it’s still a good business practice to have one.

 

5. Secure an EIN.

You’ll need an Employer Identification Number (EIN) for your business. EINs are nine-digit numbers that you can secure from the  Internal Revenue Service (IRS).

 

EIN can help identify businesses for tax purposes. It functions as a Social Security number for a business.

What Is a Wyoming LLC Operating Agreement?

An operating agreement is a contract that outlines the obligations, rights, and responsibilities of members and managers. 

 

Although not required in Wyoming, an operating agreement should be included when setting up an LLC. Once members sign the document, it acts as a binding set of rules for them to follow.

 

The document allows members to manage internal operations based on their own rules and specifications. Without an operating agreement, your business has to follow default state rules to manage internal operations.

 

The document can be 10 to 20 pages long and must set up guidelines and rules for an LLC.

 

An Operating Agreement can help protect the status of your company. It can also be helpful in times of misunderstandings between members.

Drafting & Signing An Operating Agreement

An LLC Operating Agreement is a flexible document that allows for broad modifications to be made. Generally, an Operating Agreement is valid as long as it doesn’t violate the LLC Act or contradict any other internal rules.

 

When you’re drafting the document, you must ensure that all members of the LLC sign a copy. This doesn’t have to be the same copy. Members can sign identical, but physically independent documents.

 

This means that each member may print and sign their own copy without needing to mail a single file back and forth.

The Importance of an Operating Agreement

For those establishing an LLC in Wyoming, it’s easy to see an Operating Agreement as a bureaucratic hassle. Especially because the document isn’t mandated by state law. This is incorrect thinking, however. 

 

Having an Operating Agreement ensures all members understand their responsibilities in the company. The document also protects every party in case of future disagreements. 

 

Below are some of the other benefits of having an Operating Agreement:

 

• It can protect the firm’s limited liability status.

The legal document can protect members from personal liability to the LLC. Without an Operating Agreement, tax creditors can see your firm as a sole proprietorship or partnership. This can jeopardize your personal liability.

 

• Protects against default state rules.

Each state has default rules that apply to companies without  Operating Agreements. This means that without the document, your LLC has to adhere to Wyoming’s default rules. 

 

State default rules are also generic. Meaning some rules may be difficult to apply to specific conditions in your company.

 

• It can resolve verbal agreements.

Even if the members of an LLC have agreed to certain terms, misunderstanding or miscommunication can still occur. This is why certain business terms must be in writing. This way, they can be referred to when a conflict between members arises.

Forming an LLC can be tough. Get in touch with the experts at Doola and we’ll guide you through it and process the paperwork.

Pro Tip:

Did you know that an Operating Agreement can provide more protection to your LLC? It can help protect your assets and the internal structure of your business.

Single-Member LLC Agreements

A single-member LLC is an LLC with only one owner. For this type of LLC, an Operating Agreement may seem unnecessary. This is because the document functions as an agreement between you and yourself.

 

That said, it’s still important for a single-member LLC to have an Operating Agreement. But, the document doesn’t have to be complex since the sole member won’t need protection from other members.

 

Below are three important reasons why single-member LLCs should still draft Operating Agreements.

 

• The document serves as an important step towards engaging in corporate formalities. These formalities are important as they breathe life into the company and allow you to enjoy benefits, such as the corporate veil.
• An LLC outside of a trust can be probated. You name a beneficiary for your LLC interest in the document in case you pass away. 
• An Operating Agreement functions as proof of ownership. The document is important during banking transactions.

 

If the company is manager-managed, the document must list out the duties of the manager. Otherwise, the document is simple and can be amended whenever the sole member wants to.

 

You can draft your Limited Liability Company Operating Agreement any way you want. But if you plan on submitting it to official institutions or lenders, you may want to stick to a traditional layout.

 

Your LLC’s Operating Agreement should cover the basics of how your business operates. It should address the following areas:

 

• Distributions and Contributions

The document should cover the capital contributions you, as the single member of the LLC, are making. If you’re contributing something other than cash, you’ll need to specify its value. 

 

This section should also cover how you plan on distributing losses and profits to yourself. You will report losses and profits on your personal tax return.

 

• Signature

The document should have your signature and should state your standing as the sole member. You must keep the file in a safe place and make copies.

 

• Ownership

Since you’re the sole member and owner of your LLC, this section should be easy. You’ll only need to specify that you, as the sole owner and member, will have all the voting rights. 

 

You must also outline that you have limited liability for the company’s debts and liabilities.

 

• Company Rules

The Operating Agreement for your single-member LLC should outline the basic rules for the management of the company. You should list out the rules about taking votes and holding meetings. Even though you have all the voting rights, it’s still recommended to set out these guidelines.

 

• Management

You should also state the duties and responsibilities you will have as the sole member and owner of the company. You need to outline the responsibilities you’ll be delegating to the managers you are hiring.

 

State If you plan to be the sole manager of the LLC. You should also note if you choose a successor manager to take your place should you become disabled or pass away.

 

If you want to hire managers to operate or to help you manage the LLC, you will need to explain their roles and responsibilities on the document.

 

• Dissolution

Although dissolution can be the farthest thing from your mind when you establish your company, you still need to address the topic on your Operating Agreement. 

 

It’s recommended to create a plan for how you will dissolve the company, should that time come. Doing this is a good idea and can provide you with a roadmap to follow when you close the company, should it become necessary.

 

An operating agreement for an SMLLC can help you to see your plans for your company through other people’s eyes. The document can also make it easy for you to make any necessary adjustments. 

 

Having your plan all outlined in a written document can help you stay on track when you’re managing your business, even when things get hectic.

Multi-Member LLC Agreements

 

Multi-Member LLCs are LLCs that have more than one owner. For these companies, an LLC Operating Agreement is very important because all members will need protection from each other.

 

In an MMLLC, each member will have their own duties and responsibilities and share of ownership of the company. By writing these specificities and having everyone sign, everyone can be certain that all members will uphold their end of the deal. 

 

After all, a handshake deal only has a small chance of standing up in the court of law.

 

For an MMLLC, every member of the firm must sign a copy of the document. They can print and sign their own copy without mailing one specific document around. 

 

It’s recommended to upload the signed copies online to keep the document safe. Doing this can ensure that there will always be a copy of the Operating Agreement in case of disagreement, even if one of the members loses their physical copy.

 

The legally binding contract should cover important aspects of business operations. These include investments, management structure, taxes, and profit-sharing.

 

The contents of the Operating Agreement vary depending on the needs of the MMLLC. But, the following information is usually included in the internal document:

 

• The name of the company
• Address of the business office
• A statement of intent confirming that the document adheres with state laws. The statement should also confirm that the LLC will be officially established once the documents are filed with the state.
• The nature and purpose of the business
• A statement to address possible changes in nature and purpose of the business in the future
• The potential duration of the LLC’s existence
• The company’s tax status
• The process of accepting new members
• A statement that specifies whether the company is a member-managed or manager-managed.

 

When drafting the Operating Agreement for your MMLCC, it’s important to outline all the details of the roles and responsibilities of each member and manager. This can help avoid and solve any potential disputes that may arise between members.

Member-Managed vs. Manager-Managed

When you create an LLC, you’ll need to decide how you will manage the company. For an LLC, there are two possible management structures: member-managed or manager-managed.

 

If you choose to have a member-managed LLC, all the members participate in managing the business. 

 

If you choose to have a manager-managed LLC, only designated members or certain nonmembers, or a combination of both, are responsible for running the company. Meanwhile, the other members who aren’t managers serve as passive investors who aren’t involved in managing the business.

 

The common choice for people who establish an LLC is member management. This means that all the members share responsibility for the company’s day-to-day management.

 

This approach is more common because most LLCs are small businesses and they have limited resources. This means that a separate management level is unnecessary.

 

Unlike other business entities, like corporations, LLCs have a streamlined structure. These companies don’t need officers or boards of directors. 

 

As a result, LLCs are chosen by people who want to be involved in managing and operating the company.

 

If you and the other members of your company want the same, you want a member-managed structure for your LLC. This means you and other members will be involved in making and selling products, taking orders, and providing services.

 

For example, if your company is a bakery and all the members want to play an active role in the business, you’ll want to operate the company as member-managers. 

 

You and the other members of the LLC will be involved in baking goods, hiring staff, opening and closing the shop, and coming up with recipes. 

 

In certain states, LLCs are member-managed in adherence to state law. This means that if you don’t specify a management structure for your LLC in your Operating Agreement, then it will be treated as a member-managed organization by default.

 

In certain situations, a manager-management structure for an LLC is more profitable.

 

For example, certain members of the LLC only want to be passive investors in the company. These members may feel more comfortable if the LLC delegates management responsibilities to one or more other members or nonmembers.

 

It’s also better if your LLC is too large, complex, or diverse to allow for the allocation of management responsibilities among all members. If you have a large-scale company with over a hundred members, it can be difficult to efficiently divide the managing responsibilities to every member.

 

You can address this problem by having a manager-managed structure. This way, only certain member/s or nonmember/s are responsible for running the business.

 

This structure can also be preferable if some of the members in your LLC are not particularly skilled at management. 

 

For example, you created a small art company with a group of artists. Some of them may not be comfortable with the managerial tasks of the business. 

 

To resolve this issue, you can have a manager-managed LLC and have the members who are more skilled at management lead business operations. You can even seek managers who can act on behalf of the company outside your member pool. 

 

Delegating management responsibilities to a smaller group of people or just one member can effectively balance the varied skills and interests of several LLC owners and members. 

 

This also ensures more competent management of all affairs of the company. 

 

Regardless of the management structure of your LLC,  you must have a written Operating Agreement that outlines the basic rights and responsibilities of your managers and members.

 

If you have a member-managed LLC, you need to outline in the document additional capital contributions, member voting rights, buy-out provisions, and other crucial management and operational issues for the owners. 

 

Without the legally binding document, you run the risk of finding yourself in a crisis when something unexpected arises. This is why you need to address basic issues with each member of the company through the Operating Agreement.

 

If you choose a manager-managed structure for your LLC, you may need to specify this choice on your LLC’s organizational documents. This can be in the Articles of Organization you’ll file with the Wyoming Secretary of State or in the Operating Agreement.

 

Aside from the items mentioned above for members that you want to outline in an Operating Agreement, you also need to address what authority and responsibilities the managers will have. 

 

For example, will the managers of the LLC have sole authority for all hiring decisions? Will they be responsible for making decisions involving equipment purchases? 

 

Just like with a member-managed LLC, you should also document every detail about management decisions in the Operating Agreement for a manager-managed LLC.

Need Help in Creating Your Wyoming LLC Operating Agreement?

Whether you choose to have a member-managed or a manager-managed LLC, a custom Operating Agreement is important when you’re starting your company.

 

Without the document, then the rules under the Wyoming Limited Liability Company Act will apply to your business. These are not necessarily the rules and regulations you want to adopt for your company. This is why you need to have your own written agreement for your business.

 

If you need more information about setting up your own LLC, visit doola now. We can help you start your own Wyoming LLC and address your needs when starting a business. Call doola today by dialing +1 (929) 299-2235.

 

 

Wyoming LLC Operating Agreement FAQs

Does Wyoming require an operating agreement?

Wyoming doesn’t specify the need for putting an Operating Agreement in place. But, states like Missouri, California, Delaware, and New York require people to file the document when starting a business.

Can I write my own LLC operating agreement?

You can draft your own Operating Agreement. But, it’s recommended to seek the help of legal experts to make sure you cover all important aspects of your business in the document.

What should be included in LLC operating agreements?

The contents of an Operating Agreement can vary depending on the needs of your business. But, below are some of the common points included in the document:

• The management structure of your LLC
• Withdrawal of members and return of  capital contributions
• Dissolution of the company
• Sharing of loss and profit
• Transferability of membership interests

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