What's the Difference Between Articles of Organization and Operating Agreements?

As a business owner, you may have come across the terms 'articles of organization' and 'operating agreements' when setting up your company. While both documents are essential for your business's legal structure, they serve different purposes. In this article, we'll explore the differences between articles of organization and operating agreements to help you understand their importance.

Articles of organization, also known as articles of incorporation, are documents filed with the state to form a corporation. They outline the basic information about your company, including:

• Company name
• Registered agent
• Principal office address
• Purpose of the company
• Number of shares authorized

Operating agreements, on the other hand, are documents that outline the rules and procedures for running your business. They cover topics such as:

• Ownership structure
• Management structure
• Decision-making processes
• Dispute resolution
• Financial management

While articles of organization are required by law, operating agreements are not. However, they are highly recommended to ensure that your business runs smoothly and efficiently. Without an operating agreement, your business may be subject to default rules and procedures that can lead to conflicts and disputes.

In summary, articles of organization are documents that form a corporation, while operating agreements are documents that outline the rules and procedures for running a business. Both are essential for your business's legal structure, and it's recommended that you consult with a lawyer to ensure that your documents are properly drafted.