While Missouri allows flexibility in how your operating agreement is written and what it contains, it must be part of the process when you open an LLC in Missouri. This legally binding document outlines important details like how decisions are made, how disputes are resolved, and how finances are managed.

Having these terms clearly defined can help prevent misunderstandings and reduce the risk of legal issues between members.

What is an LLC operating agreement?

An LLC operating agreement is a used when people choose the LLC as the legal business structure for their new company. In addition to the basic operational principles it details, an LLC operating agreement shows how the business will be organized both at a high level and in the day to day.

The LLC operating agreement has two core purposes. First, it protects all LLC owners (called members in LLC parlance) and, second, it helps answer complex financial and decision-making questions.

Why is an operating agreement important for Missouri LLCs?

Why do you want an operating agreement in place for your Missouri LLC? Here are some of the core benefits:

Clarity among members

In a multi-member LLC, there are multiple parties interested in the LLC, its success and its profitability.

When members must come together to determine the finances, rights, responsibilities, pay and dispute-resolution tools, everyone benefits. Without having these issues spelled out in writing, conflicts can quickly become messy. However, when all members are bound by the operating agreement guidelines, disputes are easier to resolve faster.

Defined business procedures

The specific minutia of your business is critical. The LLC operating agreement covers all those details. It will detail when meetings are held, who can vote and if those votes are weighted, communications rules and conflict resolution. Having these business procedures clearly defined helps any business, especially a new one.

Ensuring the corporate veil

The corporate veil is an important legal concept, designed to ensure that there is a separation between a business and its members. The LLC operating agreement helps to ensure that the legal separation is clearly defined.

When there is a liability issue, having the corporate veil in place helps further protect members., especially if a liability statement is included in the agreement.

Business credibility

Your LLC is going to want to have business relationships with banks, investors, vendors and partners. An LLC operating agreement lends credibility to these third parties, demonstrating the seriousness with which you take your work. It shows that you and other members take the operations and legal matters related to your LLC seriously, making those third parties more inclined to do business with you.

Key components of a Missouri LLC operating agreement

Here are the common elements of a Missouri LLC operating agreement.

Company details

This section lists whether the LLC is single-member or multi-member and the mailing addresses of all owners. The name and principal place of business for the LLC are also listed in the agreement. A Formation section details when the LLC was formed, per the filing of Articles of Organization with the Missouri Secretary of State.

Ownership structure

Thius section, often combine with the Company Details section, lists the ownership percentages of each owner. A separate section lists the capital contributions each member has made to the LLC, though members are not required to contribute capital to the venture.

The agreement usually states that members may not withdraw or reduce their capital contributions unless the company dissolves or specific language is included about withdrawals or reductions.

Language also usually states that members’ liability is limited to capital contributions members made, plus distributions to members and members’ shares of undistributed assets.

Member roles and responsibilities

In a single-member LLC, the sole owner has the authority to act on behalf of and make decisions for the company.

In a multi-member LLC, it’s important to detail the roles each member has in the company’s operations. Major decisions are usually made by vote or consent of members based on their ownership percentages.

The agreement usually prohibits members from making major decisions without unanimous consent of all members. These decisions may include sales or leases of company assets, mortgage or pledge company assets, prepay or refinance mortgages, settle claims or debts, approve a merger, or change the nature of the company.

Voting rights and decision-making

Each member will be allowed to cast votes in member meetings. In some cases, the members votes are weighted, based on their ownership shares in the company.

Profit and loss distribution

It’s important for the operating agreement to detail what happens to the distribution of profits or losses from the company annually. The agreement needs to detail how losses and profits are accrued to members’ accounts.

Usually, this section lists the order in which cash receipts are distributed. Typically, mortgage commitments and other liabilities are covered first, followed by interest payments, the establishment of cash reserves, and loan payments. After those obligations are fulfilled, members receive distributions.

Dissolution terms

How will the LLC be dissolved? The LLC can help lay out the conditions and terms.

It’s common for an LLC to dissolve by unanimous vote or consent of its members or a withdrawal event (usually the death or disability of a member). Typically, a person agreed to by the members will preside over the dissolution process.

How to create an LLC operating agreement in Missouri

Creating an LLC operating agreement requires agreement on the part of members as to the components and terms of each section. Once these details are agreed to, it’s smart to consult a legal professional to assist with the drafting of the legal agreement.

Missouri-specific considerations

While Missouri requires LLCs to have operating agreements, companies are not required to file those agreements with the state. In addition, the state provides the option for the LLC to be either written or oral, though most legal advisors will strongly recommend a written agreement.

Final thoughts & next steps

If you’re thinking of creating a Missouri LLC, it’s a smart move to start thinking about your operating agreement. The agreement is just one of several steps you will need to complete.

To form your LLC, consider using a trusted online service like Tailor Brands. Tailor Brands experts can help get your business launched quickly and legally.

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