The Missouri Operating Agreement
A Missouri operating agreement is an essential part of forming a Missouri LLC. If the LLC is owned by more than one person, then the Missouri operating agreement is a private contract among the members (owners). If the LLC is owned by just one person, then the Missouri operating agreement is a written declaration by that member. Regardless of the number of members, the primary purpose of a Missouri operating agreement is to state who has the authority to run the day to day business of the LLC, how to divide the profits and losses, and how members can join and leave the LLC.
Management of the LLC
The Missouri articles of organization must state whether the LLC will be managed by its members or by managers. (Manager managed is usually best.) Members typically delegate to managers the authority to do many things on behalf of the LLC, like spending LLC money, signing contracts, and hiring and managing employees.
Power of the Members
Unless the Missouri operating agreement states otherwise, Missouri law requires the unanimous consent of all members to: (i) amend a written Missouri operating agreement; (ii) approve a merger or consolidation of the LLC; (iii) change the LLC from member managed to manager managed, or vice-versa; (iv) authorize any LLC transaction that is outside the LLC’s ordinary course of business, and (v) decide the value of contributions required to admit new members.
Other things to think about when drafting an operating agreement include, who decides: tax matters, when to distribute profit and gain to the members, when to hire and fire managers, and when to dissolve the LLC. It is also important to decide when a member can leave the LLC, when a member can be expelled, and when the members can sell their membership interests.
Single Member LLCs
While Missouri law does not require the operating agreement of a multimember LLC to be in writing, it does for a single member LLC. More specifically, Missouri requires a “written declaration” that describes the conduct, rights, duties, and obligations of the member and the manager, if the LLC is manager managed. The purpose of the declaration is to tell others what you are authorized to do on behalf of your LLC. If you elect for the LLC to be manager managed, then you must describe what you are authorized to do on behalf of the LLC as its member and separately as its manager. Those are two different hats.
Starting a business partnership is a little like marriage. No one likes to give a lot of thought to the problems that will arise later. But drafting a Missouri operating agreement that reflects the expectations of the members will help avoid problems down the road.
This article is for general informational purposes only. It is not intended as legal advice.
Sewell Law, LC has formed hundreds of Missouri LLCs. Let us form yours. We also provide representation on LLC, business, and real estate matters, and in civil litigation. Please contact Michael Sewell at (314) 942-3232 or at michael@sewelllaw.net to discuss your legal matters.
Michael Sewell is also President of Registered Agent Lawyers, Inc. (RALI), which provides registered agent services to LLCs, corporations, limited partnerships, and other business entities. Contact Michael at (314) 942-3232 with questions or to appoint RALI as your registered agent.
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