Are you a business owner who is considering the formation of a limited liability company (LLC)? If so, you may have heard the terms “LLC agreement” and “operating agreement” used interchangeably. However, while these two documents may serve similar purposes, they are not the same. In this article, we will explore the differences between an LLC agreement and an operating agreement.

First, let’s start with some definitions. An LLC is a type of business structure that combines the liability protection of a corporation with the tax benefits of a partnership. LLCs are governed by state law, and each state has its own requirements for LLC formation and management. An LLC agreement is a legal document that outlines the ownership and management structure of the company, as well as the rights and responsibilities of its members.

An operating agreement, on the other hand, is a specific type of LLC agreement that outlines the day-to-day operations of the business. It includes information such as how the company will be managed, how profits and losses will be allocated, and how changes to the company will be made. In short, an operating agreement is a more detailed version of an LLC agreement that focuses specifically on the operations of the business.

So, is an LLC agreement the same as an operating agreement? The short answer is no. While an LLC agreement is a broader document that covers the overall structure of the company, an operating agreement is a more specific document that focuses on the company’s day-to-day operations. That being said, it is possible for an LLC agreement to include provisions that cover some of the same ground as an operating agreement, but that is not always the case.

Why is it important to have both an LLC agreement and an operating agreement? For one, it ensures that the company is legally protected and operates smoothly. It also helps to avoid disputes and confusion among the members of the LLC. Additionally, some states require LLCs to have an operating agreement as part of their formation process. Even if it is not required in your state, having an operating agreement can be beneficial for the reasons stated above.

In conclusion, while an LLC agreement and an operating agreement serve similar purposes, they are not the same thing. An LLC agreement is a broader document that outlines the structure of the company, while an operating agreement is a more specific document that covers the day-to-day operations of the business. Both documents are important to have in place to ensure that your LLC is legally protected, operates smoothly, and avoids disputes.