There are several reasons why entrepreneurs often choose to form limited liability companies. LLCs offer the same liability protection as corporations, but they are not as strictly regulated and are easier to set up. LLCs can have only one member or unlimited members, and the profits they generate are not taxed twice like C corporation profits. To set up an LLC in Missouri, the company’s organizer or organizers, who do not have to be members of the LLC, must submit articles of organization to the secretary of state. The members or organizers must also draft an LLC operating agreement.
Establishing rules and procedures
An LLC operating agreement sets guidelines for how a company will be run. It establishes rules, regulations and procedures, and it makes sure that all members know where they stand and what is expected of them. Putting these matters into writing can prevent disputes between members caused by misunderstandings and false assumptions, which is why many states require LLC operating agreements to be drawn up during the business formation process.
LLC operating agreements in Missouri
LLCs in Missouri are required to draft operating agreements, but they are not required to submit them to the Secretary of State. Operating agreements are internal documents that provide members with structure and guidance, so they should not be written in haste. The secretary of state encourages members or business organizers to create LLC operating agreements with provisions that deal with:
- The interests held by each member
- Rules for transferring membership
- The process for allocating profits and losses
- The company’s management structure
- Member voting rights
Liability protection and simplicity
LLCs have become a popular business structure because they shield their members’ personal assets from company-related litigation and are easy to form. LLCs usually have operating agreements that set rules and procedures and establish guidelines for transferring membership and distributing profits and losses.