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How to prepare an LLC operating agreement in North Dakota

On Behalf of | Jun 24, 2022 | Business Law

If you have decided to form a limited liability company (LLC) in North Dakota, one of the first things you will need to do is create an LLC operating agreement. This document will protect your business assets and can help prevent disputes among members.

LLC operating agreement

An LLC operating agreement is a contract among the LLC members that lays out the rules and regulations governing the business. The common provisions set forth by this document include:

  • The percentage of ownership interests held by each member
  • Each member’s rights and duties within the company
  • The management structure of the LLC
  • The procedures for admitting new members and removing existing members

While an operating agreement is not required by North Dakota business law, it is highly recommended that you create one. Without an operating agreement, your business will be governed by the default rules outlined in the North Dakota Limited Liability Company Act, which may not be ideal for your specific business.

Preparing an LLC operating agreement

Before you set forth rules on how you will govern your business operations, ensure that your company complies with North Dakota requirements. For example, give your business an appropriate name, and obtain proper permits and licenses. Next, gather all LLC members’ names and contact information, the percentage of ownership interests held by each member and a description of the LLC’s business activities.

With this information, you can draft the operating agreement in your own style or template but be sure to include provisions for:

  • How decisions will be made
  • What happens if a member leaves the LLC
  • How new members can join the LLC
  • How profits and losses will be distributed
  • What happens in the event of a dispute

Each LLC member must sign that document. You can give each member a copy for their own personal record and keep the original in a safe place with the other important business records.

An LLC operating agreement must be drafted in a language that every member understands. They must know what they are consenting to because they risk negative consequences for not adhering to the terms.