What are the key differences between LLC Articles of Organization and Operating Agreement?
Learn the key differences between LLC Articles of Organization and Operating Agreements, and how to create effective and compliant documents for your Limited Liability Company.
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What are Articles of Organization?
Articles of Organization, also known as Certificate of Formation, is a document filed with the state to officially create an LLC. It outlines the company's basic information, including:
- Company name
- Registered agent
- Purpose of the company
- Duration of the company
- Number of members
Once filed, the Articles of Organization become public record and serve as proof of the company's existence. It's essential to file the Articles of Organization correctly, as it can affect the company's legal status and liability protection.
What is an Operating Agreement?
An Operating Agreement, also known as Bylaws, is a document that outlines the company's internal rules and procedures. It governs the company's operations, management, and decision-making processes. The Operating Agreement typically includes:
- Ownership structure
- Management structure
- Decision-making processes
- Profit and loss distribution
- Dispute resolution mechanisms
The Operating Agreement is not filed with the state, but it's crucial for the company's internal operations and provides a framework for resolving disputes among members. It's essential to create a comprehensive and well-drafted Operating Agreement to ensure the company's stability and success.
Key Differences Between Articles of Organization and Operating Agreement
While both documents are essential for an LLC, they serve different purposes and have distinct characteristics. Here are the key differences:
- Purpose: Articles of Organization is a public document filed with the state, while an Operating Agreement is a private document governing the company's internal operations.
- Content: Articles of Organization outlines basic company information, while an Operating Agreement provides detailed rules and procedures for the company's operations.
- Filing: Articles of Organization is filed with the state, while an Operating Agreement is not filed with the state.
- Legal Status: Articles of Organization affects the company's legal status and liability protection, while an Operating Agreement does not affect the company's legal status.
Conclusion
LLC Articles of Organization and Operating Agreements are two essential documents for forming and operating a Limited Liability Company. While both serve different purposes, they are crucial for the company's legal structure and internal operations. By understanding the key differences between these two documents, you can create effective and compliant documents that help your LLC thrive.
