An LLC Operating Agreement in Tennessee
Members of a limited liability company in Tennessee may create an operating agreement to provide rules and regulations for running the company. An operating agreement acts as an internal document that indicates how members and managers relate with one another in respect to running the business. The state of Tennessee does not impose guidelines on the contents of an LLC's operating agreement.
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Significance
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An LLC in Tennessee may enter into an operating agreement at the same time, or prior to, filing articles of organization with the Tennessee department of state. Tennessee LLCs can draft an operating agreement after articles of organization get filed with the Tennessee department of state. An LLC in Tennessee that gets managed by a board has to have an operating agreement, but an LLC managed by its members does not have to create an operating agreement. However, every LLC in Tennessee should formulate an operating agreement to help avoid disputes that may arise between members and managers of the company.
Management
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The management structure of a Tennessee LLC should appear in the operating agreement. When the LLC gets managed by its members, the duties and responsibilities of the members should appear in the company's operating agreement. LLCs in Tennessee may get managed by a board that consists of non-members and members of the business. When the company gets managed by a board, the duties of the LLC's board members should appear in the operating agreement.
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Profit Allocation
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Tennessee LLCs can stipulate how the company will divide profits and losses among the members of the company in the operating agreement. Profits from the business can get split up in any manner found acceptable by the members of the business. For instance, a member of the company may have a 10 percent ownership interest in the company, but the other members of the business may decide to give her 15 percent of the company's profits. An LLC's operating agreement that does not indicate how the company divides profits will have to adhere to the default rules of the state. This means the members of the company will have to split profits according to membership interest.
Considerations
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A Tennessee LLC does not have an obligation to put the company's operating agreement in writing. Furthermore, the company does not have to file its operating agreement with any state agency in Tennessee. Once the operating agreement comes into existence, it has a binding effect on the members of the company. It is mandatory that subsequent members that join the LLC adhere to the provisions contained in the company's operating agreement.
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