Starting an LLC may involve filing articles of organization with the state and establishing internal ground rules for how your business should operate. Establishing your credibility as a legal entity is a part of the plan.
Every LLC in Louisiana is encouraged, but not required, to have an operating agreement to safeguard the company’s operations, from organization to dissolution. It ensures that all LLC members understand their roles and responsibilities. This page guides you in making a Louisiana operating agreement.
On this page, you’ll learn about the following:
Louisiana LLC Operating Agreement Content
An operating agreement is a legal document detailing the LLC’s organizational structure and operational procedures. Topics not restricted to a single member or multi-member LLC will be covered. While these provisions might not influence day-to-day operations, they must be included for legal reasons.
- Ownership: The operating agreement details who the members are and how ownership is divided, be it a sole proprietorship or LLC. Sole proprietorship refers to a single person with total control over a business, also known as a single-member LLC. Multi-member LLC members can have either equal or varying ownership interests.
- Management: Your LLC could be member-managed or manager-managed. The former means members can decide regarding contracts with third parties; the latter means only designated managers can do so. Using “manager-managed” instead of “hands-on” can reduce administrative work. Management’s authority is also limited in the Operating Agreement.
- Voting: Define each owner’s voting rights and voting thresholds, such as a majority vote, supermajority vote, and unanimous consent. A variety of approvals are needed for each type of decision.
- Changes in Membership Structure: If someone leaves the company, how will roles and ownership be transferred? A member buyout and/or replacement procedure must be outlined in the LLC’s governing document.
- Contributions: All types of contributions are accepted. In order to fund their ownership interests, members will have to invest in the collective funds.
- Equity Splits: Determine equity for each member, taking into consideration things like their contributions, responsibilities, and fairness. Maintaining fairness in your equity split will help prevent future disagreements.
- Transfers: You may want to consider outlawing transfers of ownership interests without the consent of all owners. It’s always a good idea to include permitted transfers, such as first refusal, drag-along rights, tag-along rights, and estate planning transfers.
- Business Restrictions: To protect the privacy of the company, including confidentiality obligations. You may also ban the owners from owning competing businesses.
- Intellectual Property: Detail; the ownership of intellectual property created by members. Make sure all company-created intellectual property is owned by the company. You can find alternative ownership/license structures if necessary.
- Taxation: Determine how you will be taxed and plan accordingly. Remember, however, that you must file an LLC annual report and might be required a sales tax.
- Guaranteed Payments: Determine if any of the members should receive Guaranteed Payments, which are like a salary, particularly if your LLC is taxed as a partnership.
- Distribution & Dividends: Explain to all members how the funds will be allocated. A pass-through entity will impose tax distributions regardless of profit distributions.
- Dissolution: The LLC should be dissolved if all members elect to cease operations. It is important to identify how you will end your business in your operating agreement.
Note that the operating agreement, though not a legal requirement in most states, is vital in the operation of your LLC. Should your members have issues with the business, you can deal with it with guidance from the operating agreement.
Get Help from a Registered Agent
Developing an operating agreement could be tedious at times. Besides, since it deals with how your business operates, then it would be best to have professionals help you with it to make sure you get everything right. Getting help from registered agents would be your best bet. Here are three of our best LLC services that can provide you with registered agents to free you of worries:
Importance of a Louisiana LLC Operating Agreement
Operating agreements in Louisiana aren’t mandatory if there is an LLC exists. Most states require that all business entities be incorporated to validate the structure of their business. It is possible to bypass this step in Louisiana and the LLC will not be penalized by law.
This is a must to ensure that your LLC to be shielded from any disputes or misunderstandings. Below, you can read some of the main reasons you should write this contract for the LLC.
- To safeguard the company: Basically, the operating agreement sets out the rules for an LLC. This means that the rules will be enforced by the government in case members fail to adhere to the rules. The agreement will safeguard the LLC from the government’s rules and provide other advantages.
- The LLC appears trustworthy: Investors take a look at the professionalism of the company when they are researching businesses. The operating agreement is what makes the LLC look professional since it demonstrates that the members care about the business and are determined to make the regulations and rules legal as well. So, this provides an opportunity for growth by attracting more investors.
- To verify the legal status of an LLCs: LLCs are recognized for their limited liability status and when the business has clearly stated that in the operating agreement, then the government cannot misunderstand. It is very simple for sole proprietorships to confuse an LLC comprised of a single member, however an operating contract can help establish that they’re distinct.
- To resolve any conflict: There could be future conflicts regarding distributions and decisions. The operating agreement sets out the process, requirements, rules, and guidelines for all members of the company. The operating agreement allows members to review quickly the details of the agreement prior to when they start performing a task.
- LLC flexibility is made possible due to Limited Liability Companies. Operating agreements are what allow these LLCs to have such a nature. The legality of an operating agreement provides the LLC with freedom.
- For opening bank accounts for business: Often, the owner will need a copy the operating agreement. The company will have difficulty opening an account with a bank if it does not have the original document.
How to Edit Operating Agreement of LLC in Louisiana
Operating Agreement of LLC in Louisiana can be edited when all the members agree to the amendment(s). You do not need to file it with the state.
If you need to update your LLC’s operating agreement, you can file an amendment to the document at any time. The Louisiana Secretary of State processes these amendments within 24 hours. The filing process is different than that for an annual report. While the annual report must include information about members, registered agents, and offices, the amendment can change any of the information. As long as you have the necessary signatures of the members, you can amend the Operating Agreement without having to file a new report with the state.
An operating agreement is an important document for any LLC in Louisiana. It outlines how decisions are made and how profits and losses are divided among the members. It also helps avoid legal disputes that can arise during business operations. The operating agreement is a great document to have on hand to guide your company and ensure its success.
An operating agreement is similar to a prenuptial agreement. It protects the interests of all parties. If you run your business with employees, you’ll need to obtain an Employee Identification Number (EIN) from the IRS. While this isn’t required in Louisiana, it is a good idea to have one on hand.
A name for your LLC is very important. It should not be misleading or suggest other types of businesses. It should also be unique. This means that another entity cannot register under the same name as your LLC. Make sure that you choose a name that will be easy to remember and that will attract a lot of customers.
If you’re looking to incorporate a new business in Louisiana, it’s a good idea to choose an LLC. This legal structure offers many benefits, including lower personal liability. It’s also simple and inexpensive to form an LLC in Louisiana. The only downside to creating an LLC in Louisiana is that it’s best to avoid rushing.
In the state of Louisiana, you can file an LLC by filing an Articles of Organization. The filing fee is $100 for a domestic LLC and $125 for a foreign LLC. The filing fee for an LLC is a one-time fee. In addition, you’ll need to pay a registered agent fee. After that, you’ll need to choose a registered agent, who will serve as the business’s registered agent and receive all legal notices, paperwork, and service of process. The registered agent must also be 18 years of age or older.
An operating agreement details how the LLC will operate and how its members will be managed. While some of its provisions may not impact day-to-day operations, it’s important to include them for legal reasons. For example, it’s important to determine the type of ownership your LLC has. Single-member LLCs are one-person operations, while multi-member companies are comprised of multiple members with equal ownership.
In Louisiana, LLCs must pay state taxes. If they employ employees, they must file a state form R-16019 to report the employees’ wages and pay employee taxes. Also, if they sell products or services, they must collect and remit state sales and use taxes at the point of sale.
In order to clearly state the purpose of a business as well as its ownership interests, a written operating agreement is strongly advised in Louisiana.
You and other members of the LLC will be unable to reach any agreements if you do not have an operating agreement. Even worse, your LLC must follow the state’s default operating conditions.
It is required by law in California, New York, Maine, and Missouri, but it is not in Louisiana. Although it is not legally required, creating a written agreement is strongly advised. You may self-notarize and distribute the documents.
The operating agreement is an important document for your Louisiana LLC. However, it is not mandatory to file in many states. It is strongly recommended to file the operating agreement even if it is not required in your state. Get a professional LLC service to file your operating agreement properly.