How to Create an Alaska LLC Operating Agreement and Why

Forming an LLC in Alaska? An operating agreement isn’t required by law, but it’s still a smart move. This document outlines how your business runs, helping prevent conflicts and keeping everything on track. Here’s what you need to know.

After officially setting up an LLC in Alaska, you’ll need to think about your business’s structure and how it will operate internally. For that, one of the most important documents you can prepare is an LLC operating agreement. As you may know already, part of the LLC formation process is submitting paperwork with the Alaska Secretary of State, such as the Articles of Organization. Alaska does not require LLCs to submit an operating agreement, but it’s always a good idea to have one in place before launching your new business. 

Because this agreement is so valuable and contains various moving parts, you need to know what to expect and what to put in the document. This article will guide you through the different steps and processes so you can start your business on the right foot. Here’s everything you need to know about creating an Alaska LLC operating agreement. 

What is an LLC Operating Agreement?

An LLC operating agreement is a document outlining all the particular details of how your business operates. The agreement is between the founding members and is legally binding once all members sign off on it. This way, everyone is protected by the agreement and its bylaws. The more detailed and in-depth the agreement, the easier it is for everyone to be on the same page regarding every aspect of running your business. 

Why is an Operating Agreement Important for Alaskan LLCs?

Starting and running a business with multiple people can help spread the workload so one person doesn’t have to do everything. However, the challenge of operating an LLC with other founders is that there can be disagreements or conflicts regarding different parts of the company’s operations. Having an operating agreement in place ensures that everyone knows the proper procedures for things like daily operations, business decisions, and other relevant details. 

Not having an agreement in place can lead to complications and potential legal disputes. For example, how will profits be divided among the founding members, and will those distributions change or evolve over time? Is there a hierarchy of who gets paid first? Discussing and adding these details to your operating agreement can streamline your business and potentially prevent problems down the line. 

Key Components of an Alaskan LLC Operating Agreement

Because each business is unique, your operating agreement may include additional sections and details that aren’t “standard” with this kind of document. However, regardless of your business type, here’s a rundown of the basic elements that should be in the agreement. 

Ownership Structure

What percentage of the business does everyone own? Do all founding members have an equal share, or do some members own more of the business than others? Also, is there a way for the ownership structure to change? For example, if a founding member invests more capital, do they increase their share? 

Member Roles and Responsibilities

Not all founding members will be involved in the day-to-day operations of the business. In some cases, an LLC may use managers to make operational decisions about the business, freeing members from any responsibility. Your operating agreement should provide as much detail about who is responsible for what and the chain of command within the business. Also, it should be clear whether one person is the ultimate authority over an aspect of the business or if all members (and managers) must be involved with decision-making. 

Voting Rights and Procedures

Even if members are not involved in daily operations, they must be involved in decisions that affect the whole company, such as adding or removing a member, adjusting ownership shares, and more. The operating agreement should outline voting rights, including whether any member has veto or overruling power over other members. The agreement should also outline the procedure for scheduling and holding a vote, such as having a minute-taker present and what to do in the event of a tie. 

Profit and Loss Distribution

Part of the appeal of forming an LLC is that each member has limited liability regarding losses and debts. However, members may need to invest more money to cover losses to keep the business afloat. Your agreement should detail how profits and losses are distributed among members, including who gets paid first, who is first to cover losses, and so on. Hierarchy is crucial because even if each member has an equal profit share, funds may not be distributed equally every time. 

Dissolution Terms

Dissolving your LLC doesn’t necessarily mean your company is out of business. For example, one or more founding members may leave the company, so it’s best to dissolve the LLC and form a new one with the remaining (or new) members. Even if you’re dissolving the LLC because the company is no longer operational, you must outline this process in the operating agreement. 

If you don’t include the dissolution terms in your agreement, there may be conflicts or disputes on how to end the business or the LLC. Having these details spelled out in writing can potentially avoid legal battles and lawsuits. 

How to Create an LLC Operating Agreement in Alaska

Before crafting an operating agreement, it’s imperative to have all founding members (and managers, if applicable) involved and aware. While not everyone needs to be included in every aspect of creating the agreement, they should provide input regarding elements like voting rights, profit distribution, and management structure. 

A great way to ensure you stay organized and efficient is to utilize an operating agreement template. But, be sure to add any extra sections that apply to your business specifically. Overall, adding more details to the agreement is always a good idea, especially if you have three or more members or managers involved. 

Even if you craft your operating agreement yourself, it’s best to consult a third-party LLC formation service before finalizing the document. A consultation can help ensure you have covered all legal aspects of the agreement and that nothing is too ambiguous or confusing. Also, using a third-party service can eliminate any suggestion of bias or unfair advantage of a particular member. 

Alaska-Specific Considerations

In Alaska, LLCs can be managed by members or managers. If an LLC is member-managed, it only needs at least one member. However, if an LLC is manager-managed, it needs at least one member and one manager. One person cannot act as both. 

All Alaska LLCs need a business license to operate within the state, and you must have a registered agent with an Alaskan address. It’s best to secure these elements before drafting your agreement so you can discuss policies and procedures regarding them within the document. For example, if your LLC needs to change its registered agent, who is responsible for handling that? 

Final Thoughts and Next Steps

Now that you know what should be included and how to create an operating agreement, the next step should be to find an LLC formation service like Tailor Brands. Not only can we help you draft and finalize your agreement, but we can also act as your registered agent and help you file all the necessary documents with the Secretary of State. 

Forming and running your business doesn’t have to be an ordeal. Let Tailor Brands handle the paperwork so you can focus on building a stronger foundation for your LLC. 

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