Q: Is an Operating Agreement the Same As Bylaws?
A: Dear Curious,
Bylaws are internal documents that govern a corporation, and operating agreements break down an LLC’s operating procedures.
Operating procedures in the corporate bylaws lay out specific rules for members executives, employees, and shareholders. They typically include contact information for the corporation, procedures for director and shareholder meetings, types of shares issued by the corporations, recordkeeping procedures, and the rules for amending bylaws. A defining element of corporate bylaws, which differ from an LLC operating agreement, is that the bylaws should be closely kept with meeting minutes and board resolutions.
While individual board members are not named in corporate bylaws, each LLC member is named in the operating agreement. Otherwise, the LLC’s operating agreement is slightly more flexible. The agreement contains each member’s ownership percentage, their rights and obligations, details about profit and loss allocation, and management responsibilities. Even an individually-owned LLC should have an operating agreement to differentiate itself from a sole proprietorship.
Whichever type of business you have, it’s important to consult a Family Business Lawyer™ about what details need to be included to best protect your business and help it run smoothly.