Just as corporations have by-laws, most people assume that limited liability companies (LLCs) need to have operating agreements. But under North Carolina law, do they?
The North Carolina Limited Liability Company Act, G.S. § 57D, was rewritten a few years ago to modernize the laws applicable to LLCs. One of the key changes of the new LLC Act is that an operating agreement need not be in writing.
Thus, the LLC operating agreement can be in any form: in writing, oral, implied, or probably even in a text message or voicemail (not that we advise you use these latter options).
The operating agreement is also permitted to specify the form that it, or amendments to it, have to be in. So, for example, you could have a written operating agreement stating that any amendments must be in writing. This would prohibit anyone from later claiming that an oral amendment to the operating agreement was valid.
The safest course of action, not surprisingly, is to continue to have a written operating agreement specifying the rights and responsibilities of members and interest owners. A prudent LLC owner should ensure that the operating agreement specifies how amendments to it can, and cannot, be made.
The purpose of having an operating agreement is to clearly spell out the parties’ rights and responsibilities – and to avoid future conflicts over what those rights and responsibilities are. The clearer the operating agreement is, the less likely you are to have a dispute about it. This is why it is important to have your agreement reviewed by an attorney familiar with the requirements of the LLC Act.
DYE CULIK PC is a Charlotte, North Carolina business law firm that represents entrepreneurs and business owners. If you have questions or concerns about your company, give us a call at 980-999-3557 to see how we can help.