Georgia LLC Operating Agreement: Drafting Checklist

Starting a business isn’t merely setting up an office and opening your doors to the world. Successful business owners must file specific documentation and become familiar with pertinent information before they become a limited liability company (LLC) and start providing a service to clients.

Officially starting a limited liability company within Georgia first requires registration with the Secretary of State.[1] Compliant business owners will then initiate the next step by filing their Articles of Organization, and a CDE 030 form.[2]

The final step includes filing the transmittal form with the Georgia Corporations Division.[3] After you file the above documents, you’ll officially have your LLC.

However, forming an LLC still requires more critical documentation. While not compulsory by state law, owners should also draft an LLC operating agreement. This document is crucial as it outlines your business strategy, regulations, and provisions and legally binds your members to these statements.

An operating agreement will be helpful for all business types if you have a small business, plan to grow your LLC, or run a large company.

Key Takeaways

• Defining an operating agreement — This article includes some of the requirements for creating an operating agreement in Georgia, the benefits, and which companies need one.

• Drafting an operating agreement — You’ll need to follow the necessary steps and information to prepare your operating agreement to finish your LLC formation.

• Creating your operating agreement through a filing service instead of drafting it yourself — Forming an LLC can be time-consuming. Instead of losing time on paperwork, you can hire a filing service to do this for you.

What Is an LLC Operating Agreement?

A limited liability company operating agreement is a legal document that specifies and customizes the terms of your business strategy, including day-to-day operations, provisions, regulations, and agreements.

This document is beneficial because it standardizes and governs your daily duties and how you conduct business as an LLC. Your LLC operating agreement must also be signed by the relevant members in the document, as they are vital to the business structure.

After forming a business strategy, owners should ensure their tax-purpose operations comply with state law and the Georgia Limited Liability Act. In this way, an operating agreement acts as a legal clarification for all specifics of your business.

State Requirements

According to Georgia state law, an LLC operating agreement is not required. However, it is still highly encouraged. If you draft the document, you won’t need to file it with the Georgia Secretary of State as it is an internal document.

However, foreign LLCs registering in Georgia should ensure their information fully complies with the Georgia Limited Liability Company Act, as they must be listed as partnerships[2].

LLC Operating Agreement Benefits

Starting a business requires a lot of paperwork and collecting of information. You might be asking why you need an operating agreement for your LLC in the first place. Let’s take a look at just some of the benefits of this internal document:

• Clarifies a business plan and makes it legally binding. When forming a business entity, you’ll want all your day-to-day operations and member rights on paper. An operating agreement covers almost every aspect of your business, from income tax and bank accounts to company management.

• Protects you regarding personal liability. Creating an operating agreement draws a legal line between the LLC owner and the LLC entity. This means no one will hold you accountable for any debts that accumulate. An operating agreement protects your assets.

• Customizes your LLC’s policies legally. Without an operating agreement, your LLC will fall under default state rules. This makes business operations inefficient, as you must consult state laws when making essential decisions.

Who Needs an Operating Agreement?

Not all business entities are the same when it comes to state law. Because of their specific operations, the needs for an operating agreement can vary. Some businesses that will benefit from one include:

• Any Limited Liability Company — LLCs will significantly benefit from an operating agreement. This is because they separate the members from the LLC, which is vital for protecting personal assets.

• Businesses within New York, California, and Missouri — These three states require LLCs to form an operating agreement by law. This isn’t the case if Georgia is your place of business. However, drafting and differentiating them from the state’s default rules is still highly beneficial.

• Business formations with many members — Small and large businesses can benefit from forming LLCS because all member agreements are legally binding.

• S-Corps and C-Corps — Similar to corporations but not federally taxed, S-corps and C-corps with this business formation would benefit from creating a customized operating agreement.

Drafting Your Georgia LLC Operating Agreement

Once you’ve created an LLC operating agreement, you must assemble the necessary information and components. It’s a legal document, so the information provided has to comply with the Secretary of State. Make sure to obtain proper legal advice before going forward in creating one.

Let’s take a closer look at some of the things you’ll need:

• LLC basic information — Business owners should collect information about their LLC, including place of business, business name, service of process, and employer identification number.

• A registered agent — LLC formation requires a registered agent to deal with legal documents on your behalf.

• Compliance with filing the Articles of Organization — This is particularly important as you won’t be able to register your business without it. Once your business is registered, you can use the information to draft your operating agreement correctly. This includes paying a filing fee with the Secretary of State in Georgia and registering the company’s name.

• An operating agreement template — Operating agreements are complex documents. To make drafting one easier, you can choose from multiple templates. Some business owners will make their agreements from scratch. However, this option is additionally complicated and could be more time-consuming.

Step 1: Provide Business Information

First, you must collect primary business legal information to create your operating agreement. Here is some of the vital information you’ll need to begin:

• The company’s name — Your company name must be approved by the Secretary of State in Georgia as distinguishable.

• Principle place of business — Business owners must indicate where they’re doing business, including a city such as Atlanta, Georgia.

• The employer identification number — This unique nine-digit number will be assigned to you by the IRS for paying federal taxes and writing annual reports.

• Registered office — To complete the operating agreement, enter an official registered address where your agent will receive all legal documents regarding your business.

It’s best to collect this information as you start your LLC. That way, you can access it quickly and have it on hand for initiating the business agreement drafting.

Step 2: List LLC Members

Listing the members included in your LLC is the second step for business owners seeking to make an operating agreement. You’ll also need to clearly define your members’ responsibilities while specifying their roles and positions.

Many administrative operations are closely connected to listing the members. These include voting rights, ownership percentages, membership interests, and member contributions. You’ll also identify your LLC as a single-member LLC (if you’re the only member) or a multi-member LLC.

As you add members to the agreement, you’ll be able to figure out a rough outline of your business strategy. This will help you decide on day-to-day operations and how to conduct business. It’s also the part of the agreement that allows you to protect members from personal liability legally. In cases of bankruptcy, members won’t be held personally accountable.

As we’ll later discover, removing or adding members requires a specific amendment approach and can change the administrative operations mentioned above.

Step 3: Decide Member-managed vs Manager-managed

Management of the company is yet another aspect of your LLC that needs specification. A multi-member company benefits from a coherent structure to properly engage in decision-making. There are two main structures that you can choose from:

• A member-managed structure — All members take a proactive approach regarding decision-making. Once voting rights and member responsibilities are in place, members can have their say in day-to-day operations within the LLC.

• A manager-managed structure — This management structure is more common with larger LLCs where the members are not present to engage in every aspect of daily operations or discussions. Instead, they’ll appoint one or two managers to fulfill this role.

Single-member LLCs technically fall into the member-managed category by default. Even then, business owners can hire managers to undertake the decision-making responsibility.

Step 4: Lay Out Administrative Operations

Once you’ve specified the members and settled on a management structure, you can form a concrete and legal business plan for your LLC. Namely, you’ll want to lay out the daily administrative operations your business will encounter. This ensures all members are on the same page for an agreed strategy while moving forward.

Laying out administrative operations to conduct business in this internal document entails tailoring your business plan to the members’ needs. Some administrative procedures that need to go in your operating agreement include:

• Voting rights — Authority might not be the same for each member of your LLC. Some might make more financial contributions which can result in more participation. You must clearly state this information within your document.

• Capital contributions — Members are expected to each add a certain amount of capital to fund your LLC. Once verbally agreed upon, the document should contain these statements to avoid later confusion.

• Allocations — Businesses will suffer losses at certain times while gaining profits at other times. Excellent operating agreements have a clearly defined method for distributing these allocations between the members.

• Business bank account — An operating bank account for funds and tax purposes is another crucial element. This will help you better organize and file annual reports with the IRS.

Step 5: Add and Remove LLC Members

LLC members can change throughout the years. That’s why you want a reliable method for adding or removing members from the agreement. It’s worth noting that doing so will have additional effects on the other members and administrative operations, such as membership interests, distributions, ownership percentages, and voting rights.

For example, buying out one member of your LLC might change the voting rights of the remaining members. Afterward, you’ll need to amend the operating agreements to reflect this change in management. Business owners will also have to pay special attention to indemnification provisions as new members might be indemnified for expenses that incur.

Overall amending an operating agreement is a process that requires careful reviewing and consideration. Members must sign the new status once the appropriate changes are made to reflect it.

Create Your Operating Agreement Through a Filing Service

Drafting a Georgia LLC operating agreement can be an enormous task for business owners. Many find it time-consuming and inconvenient to collect all the necessary state law information. However, once you start an LLC, you’ll need an operating agreement to specify your policies.

If you’re looking for the next step after forming your LLC, our LLC operating agreement service ensures you have a compliant document for conducting business in Georgia. Start your business off on the right foot. File for your LLC through us today and include our LLC operating agreement add-on in your cart to ensure all your necessary documents are completed at the beginning.

Our operating agreement filing service is the cheapest and most secure option for accelerating your business goals. It’ll take all the stress out of the process while you can focus on doing what you do best — building your business.

FAQs

Is an LLC Operating Agreement required in Georgia?

No, an LLC operating agreement is not required legally in Georgia. It is an internal and private document. However, drafting one allows you to customize your LLC’s policies to differentiate it from default Georgia state laws.

How does an LLC Operating Agreement help protect my assets?

An LLC operating agreement essentially differentiates you from the LLC or business entity. This means you are legally two distinct entities. If the LLC accumulates any debts, your assets will be protected. This goes for the members of your LLC too.

Who needs access to this document once it’s drafted?

The operating agreement for an LLC is a private and internal document. This means that only the members of the LLC and potentially the registered agent needs access to it. You don’t have to file it with the Secretary of State.

How do I edit information on this document if membership changes?

Editing the document or making amendments would be best done by drafting a new one with the specific changes. Adding a member can change other operations, such as membership interest and voting rights. Once complete, the members need to sign the new document.

What other legal documents do I need to draft for my Georgia LLC?

You’ll need to file the Articles of Agreement and the CDE 030 form with the Secretary of State to officially register your business in the state of Georgia.

Bibliography

1. Georgia Secretary of State. "Register an LLC with Georgia Secretary of State." Accessed June 20, 2023.

2. Georgia Secretary of State. "Instructions for completing Form CD 030." Accessed June 20, 2023.

3. Georgia Secretary of State. "Business Services." Accessed June 20, 2023.