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As a Business Owner, An Operating Agreement Can Be A Wise Step for an LLC

As a Business Owner, An Operating Agreement Can Be A Wise Step for an LLC

Nov 29 2019

As a Business Owner, An Operating Agreement Can Be A Wise Step for an LLC

When you start a business, keeping your legal house in order remains a first step priority to begin operations. 

As a founder, you will need to determine the type of entity you would like to set up, and who is actually involved in the company’s management and ownership, including initial investors—of which you may be all three.  You can set up a number of different types of entities—often a B corp., a sub-S corp., an LLC, a C corporation, or a sole proprietorship.

The Sheltowee Business Network will be rolling out a new legal documents package for all entrepreneurs and mentors to use under its membership by Jan. 1, 2020.  This single use of your Sheltowee membership could save you thousands of dollars in organizational time and disputes.  Go to to join today for under $25 a month.

Remember to review state law for the state in which you are registering.  Have you heard about the Kentucky Business One Stop Portal?  The Kentucky Business One Stop Portal makes your business experience faster and more efficient by allowing your business to file annual reports and statements of change with the Secretary of State, renew certain professional licenses, and register or update certain account information with the Department of Revenue.  Visit

Often an operating agreement is a wise step for founders in an LLC to protect your personal assets.  An operating agreement used by LLCs generally outlines the business' financial and functional decisions such as rules, regulations and provisions. Governing internal operations of the business that suits the specific needs of the business owners is an important founder’s goal.

Many states don't require LLCs to have an operating agreement, but check with your secretary of state to see what the rules are. The state of Kentucky does not require the document for a business to operate. It is, however, highly recommended that the owners/members implement the document to provide the protections and incentives available provisions of a standard form. 

The State of Kentucky requires all LLCs to nominate a registered agent. Essentially, the registered agent will act as a third-party contact for the LLC, receiving annual state filings and service of process notices.

An S corp operating agreement is a business entity managing document. Typically, an operating agreement is a document that defines how a limited liability company will be managed. An S corp actually uses corporate bylaws and articles of incorporation for the purpose of organizing the business operation.

Corporations are required by law to file their articles of incorporation with the secretary of state or similar business filing authority.  Limited liability companies, on the other hand, are not always required by law to have an operating agreement or file the agreement with the business filing authority.

There are also operating agreements for sole proprietors—a single member LLC operating agreement.  For a sole proprietor, this can provide an outline of the business and allow protections and benefits that such a document can provide.