A limited liability company is akin to a private limited company, a business structure where the partners of the company are only liable under law to the extent of the investment they have made in the company.

It is often registered under the laws of the jurisdiction where it is incorporated, to comply with tax and other business regulations.

It may operate as a partnership if there are two or more members, however, it may also consist of a single member and hence operate in certain ways as a sole proprietorship.

What is a North Carolina LLC Operating Agreement?

A limited liability company (LLC) operating out of North Carolina, United States will enter into a North Carolina LLC Operating Agreement (operating agreement) to ensure uniformity for operational and financial reasons.

Though the State of North Carolina does not require an operating agreement for an LLC, yet it is recommended to enter one to ensure the smooth operation of the company.

The operating agreement is an internal document and while it is not mandatory to execute such a document, it has been considered an essential element for the smooth operation of LLCs, which details the financial commitment of the members of the LLC to the company and to each other.

Additionally, on the operational side, the roles of the members of the company along with provisions relating to accounting methods and tax liabilities are also provided.

When do I need a North Carolina LLC Operating Agreement?

The incorporation of an LLC in the state of North Carolina requires a separate set of documents. Once that procedure is completed and the LLC is incorporated, the first step should be signing an operating agreement.

As mentioned earlier, such an agreement is not mandatory yet it is a norm in business practices due to the ease in which members can ascertain the liability they have towards the company as well as the profits that they stand to gain from the company. Therefore, after immediately incorporating the LLC in North Carolina, it becomes important to create an operating agreement.

What is included in a North Carolina LLC Operating Agreement?

The following clauses can be found in an operating agreement:

Details regarding incorporation of the North Carolina LLC

The names of the members and the registered address of the company in North Carolina will be stipulated in the document.

The term of the operating agreement

The operating agreement continues perpetually till the dissolution of the LLC and such a clause will incorporate that.

Capital contributions

The capital contributions of the members and the terms on which the contributions can be increased or withdrawn will be drawn out.

Distribution of gains or losses

The losses or profits will be divided amongst the members.

Assignment of Interests

The clause decides in what ways a member can assign the rights and interests of a company, for example, mortgage or hypothecate property of a company.

Books of accounts

The operating agreement will also stipulate methods of accounting, how to maintain books for the company and how to maintain records of tax returns. This is relevant for the purpose of determining the liability of the members as well as their gains.

Dissolution of the firm

The operating agreement will also mention the share that each member will receive upon the dissolution of the firm.

Other ancillary provisions will also be included in the agreement such as the procedure to make amendments, introduce new members, dispute resolution clauses, indemnification clauses etc.

Key Considerations

Is there a requirement to disclose the operating agreement in North Carolina?

There is no requirement to disclose the North Carolina operating agreement as it is a document created for the internal functioning of the company incorporated in the state of North Carolina. The company should however retain and safely keep the copy of the operating agreement and any modifications thereof.

Should I seek a lawyer to make amendments to my operating agreement?

There may be simple modifications made to the agreement such as the address of the company and amendments to other ancillary clauses. However, for clauses which determine the contribution of each member, their withdrawal, or the introduction of a new member it is always advisable to consult a lawyer who is familiar with the commercial laws of North Carolina.

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Finally, it is important to note that the operating agreement is an effective compromise between ensuring better day to day operations of the company as well as safeguarding the interests of the members of the company.

Therefore, LLCs incorporated in North Carolina must draft a suitable and appropriate operating agreement. CocoSign has templates for different North Carolina LLC Operating Agreements along with templates for different LLC Operating Agreements as well.


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