[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-1-en-105":3,"doc-seo-281973-105":53,"doc-detail-281973-en":127},{"code":4,"msg":5,"data":6},0,"success",[7,14,19,24,29,34,39,44,49],{"id":8,"doc_module":9,"doc_module_name":10,"category_name":11,"show_sort_weight":12,"slug":13},11,1,"Template","Presentations",90,"presentations",{"id":15,"doc_module":9,"doc_module_name":10,"category_name":16,"show_sort_weight":17,"slug":18},12,"Resumes",80,"resumes",{"id":20,"doc_module":9,"doc_module_name":10,"category_name":21,"show_sort_weight":22,"slug":23},14,"Invoices",70,"invoices",{"id":25,"doc_module":9,"doc_module_name":10,"category_name":26,"show_sort_weight":27,"slug":28},15,"Posters",60,"posters",{"id":30,"doc_module":9,"doc_module_name":10,"category_name":31,"show_sort_weight":32,"slug":33},16,"Social Media",50,"social-media",{"id":35,"doc_module":9,"doc_module_name":10,"category_name":36,"show_sort_weight":37,"slug":38},17,"Forms",40,"forms",{"id":40,"doc_module":9,"doc_module_name":10,"category_name":41,"show_sort_weight":42,"slug":43},18,"Letters",30,"letters",{"id":45,"doc_module":9,"doc_module_name":10,"category_name":46,"show_sort_weight":47,"slug":48},21,"Paper Templates",5,"papers-templates",{"id":50,"doc_module":9,"doc_module_name":10,"category_name":51,"show_sort_weight":4,"slug":52},158,"General","general-158",{"code":4,"msg":54,"data":55},"ok",{"site_id":56,"language":57,"slug":58,"title":59,"keywords":60,"description":61,"schema_data":62,"social_meta":120,"head_meta":122,"extra_data":124,"updated_unix":126},105,"en","the-top-three-provisions-for-every-llc-operating-agreement-insights-thought-leadership-december-10-2018","The Top Three Provisions for Every LLC Operating Agreement - Insights Thought Leadership - December 10, 2018","","A thought leadership overview outlining three core areas every LLC operating agreement should address: governance, economics, and exit. It explains how management may be structured as manager-managed or member-managed, what key decisions can require approvals, and how roles and deadlock resolution should be defined. It also covers capital and profit distribution flexibility, tax-driven provisions to prevent phantom income, and transfer and dissociation mechanics, including payment terms and rights of first refusal.",{"@graph":63,"@context":119},[64,80,102],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":41,"@type":70,"position":76},"https://docshare.wps.com/template/letters/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/the-top-three-provisions-for-every-llc-operating-agreement-insights-thought-leadership-december-10-2018/281973/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/the-top-three-provisions-for-every-llc-operating-agreement-insights-thought-leadership-december-10-2018/281973.png","ImageObject",442,249,{"name":88,"@type":89},"Lute","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-10-19","2026-09-16",true,{"@type":98,"interactionType":99,"userInteractionCount":101},"InteractionCounter",{"@type":100},"ViewAction",6,{"@type":103,"mainEntity":104},"FAQPage",[105,111,115],{"name":106,"@type":107,"acceptedAnswer":108},"What governance provisions should an LLC operating agreement include?","Question",{"text":109,"@type":110},"An operating agreement should define decision-making authority and distinguish between manager-managed and member-managed structures. 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Unlike a corporation, you don't need boards of directors, bylaws or annual meetings. You also have a lot more flexibility in the kind of equity you can offer. The management, economic and ownership terms can all be set forth in one agreement, called an \"operating agreement\" or\"LLC agreement.\"  \nBecause operating agreements are so central for LLCs, it's critical to carefully think through the agreement to make sure it works for your start-up and that you aren't missing anything important. In that vein, we've summarized below the three broad areas that should be addressed in every operating agreement.  \n1. Governance: An operating agreement should clearly detail how decisions are made and who gets to make them. Generally speaking, LLCs have two types of management structures: \"manager managed,\" in which managers are appointed by the members and have primary decision-making responsibility and \"member managed,\" in which the members have primary decision-making responsibility.  \nIf the LLC is \"manager managed,\" the founders should think about what types of decisions should require member approval. These would typically be \"fundamental\" decisions – like whether to sell the LLC, merge with another entity or shut down and dissolve. Members might also want to approve important decisions like admitting new members, borrowing money (more than a threshold amount) or hiring or firing key employees. Some LLCs have officers; others don't.  \nThe responsibilities and powers of the different actors – members, managers (if any) and officers (if any) should all be clearly set forth in the operating agreement. The operating agreement might also address deadlock resolution, if members disagree.  \n2. Economics: LLCs provide flexibility when it comes to both capital investment and profit distributions. Membership interests can be issued for cash, for assets (including a going business) and for services to be rendered. Members can negotiate preferred returns, special allocations of tax benefits and complex \"waterfall\" distributions. Distributions need not be based on ownership percentages. But these provisions can be tricky with important tax consequences, so be sure to consult your tax professional to avoid future tax surprises.  \nWe generally recommend that the operating agreement include mandatory tax distributions to avoid \"phantom income,\" that is, allocations of taxable income to members who will want the LLC to pay out enough cash to the members so they can pay their income taxes on LLC profits.  \n3. Exit: The LLC's members need to know when they can get their capital back or sell their interest. Generally, an LLC won't let you get your money back until the LLC is sold. Capital is needed for business purposes, not for return to the members.  \nYou may be able to sell your interest, however. That might create a conflict because the continuing members want to know (and approve) everyone who has an ownership interest. In a start-up or a family business, people will likely be working closely together and they may not want \"strangers\" participating in the business. For that reason, and  \nThought Leadership 1  \nbecause of technical legal issues on limits on transferability, the operating agreement often provides for rights of first refusal. The company and the other members can purchase the interest of a member who wants to sell to an outsider, either for the outsider's price or perhaps for a pre-agreed price.  \nOperating agreements will often include an exception to the rights of first refusal to allow members to make transfers to family members or for tax planning.  \nMany start-up LLCs choose to include purchase rights on an \"event of dissociation,\" that is, an event (e.g. , death, disability, resignation) that means the member will no longer","cbCaiiXkvj4TlBst","https://ap.wps.com/l/cbCaiiXkvj4TlBst","pdf",341366,"English","# The Top Three Provisions for Every LLC Operating Agreement\n## Governance\n## Economics\n## Exit","[{\"question\":\"What governance provisions should an LLC operating agreement include?\",\"answer\":\"An operating agreement should define decision-making authority and distinguish between manager-managed and member-managed structures. It should also spell out responsibilities for members, managers, and any officers, and address deadlock resolution if members disagree.\"},{\"question\":\"Why does the article recommend mandatory tax distributions in an operating agreement?\",\"answer\":\"It aims to avoid “phantom income,” where members are allocated taxable income but may not receive enough cash to pay taxes. Mandatory tax distributions help ensure the LLC pays sufficient cash to members for income tax obligations.\"},{\"question\":\"How does an operating agreement typically handle exit and transfer of LLC interests?\",\"answer\":\"It should clarify when members can receive capital back or sell their interest, often restricting withdrawals until the LLC is sold. It may include rights of first refusal, exceptions for family or tax planning transfers, dissociation purchase rights, and defined payment terms to avoid cash strain.\"}]","The Top Three Provisions for Every LLC Operating Agreement - Insights Thought Leadership - December 10, 2018 | PDF",1789569327]