1

I've registered a new LLC with the State of Iowa. My state does not require an operating agreement, but I read online that it's a good idea to have one to protect your personal finance from liability further that just having an LLC would, so I made an operating agreement. My question is: what do I do to put this agreement on record, besides just keeping it in my personal folder at home? There is nowhere on my state's filing website where I could upload such an agreement.

I'm a sole proprietor with no employees at this time. My concern is that if a question comes up that would put the operating agreement into play, how would people know that the agreement was established originally and I didn't just write a new one to suit the situation? Would the creation date of the PDF file be enough proof? How often is such proof needed? Or am I worrying about this for nothing?

1

Normally operating agreements are kept in private files in a home or office. The law in Iowa legally requires the managers or manager-members of an LLC to maintain the records of a limited liability company in an organized fashion including an operating agreement, if any.

(In most countries in continental Europe, Latin America, Africa and Asia, these kinds of company records have to be kept instead in the custody of a notary public who has more record keeping responsibilities and education comparable to a lawyer, unlike a U.S. notary public. I don't know what the rule is in Puerto Rico and Louisiana, where the legal systems are based on Spanish and French law respectively, but have been influenced by the law of other U.S. states over the years.)

An operating agreement can't change the rights of the LLC vis-a-vis third parties. It is only binding on the members of the company, the company itself, and tax authorities. When you have only one member, the LLC is disregarded for tax purposes, so what the operating agreement says doesn't even affect the tax authorities. So, as a practical matter, there are almost never meaningful disputes over the authenticity or date of execution of an operating agreement in a single member LLC, and if there are, your signature and the date on the original operating agreement will be presumptively valid.

If you have more than one member, the presence of original signatures from more than one person on the operating agreement will typically be sufficient to authenticate the operating agreement in any dispute that arises between the members, between a member and the company, or with taxing authorities.

It doesn't hurt to have a copy somewhere as well, because an operating agreement is not like a dollar bill. The physical document isn't something with legal power, the physical document is only evidence of what you have decided to do and your decision is what has the actual legal power. So, as long as you can authenticate a photocopy of the original operating agreement that is just as good as the real thing, and normally identifying the fact that you signed the operating agreement will be sufficient to authenticate it.

  • When I was researching info on what to do to start an LLC, an article I read stated that the Operating Agreement could prove helpful if, for some reason, the "Limited Liability" is ever challenged in court and someone tries to go after my personal assets. Is that correct? Also, if I ever hire somebody as an employee, should I ask them to sign the operating agreement as well, or is that just for small business owners? (I made the LLC "Member Managed", if that makes a difference) – Creature Jan 31 at 15:50
  • 1
    @Creature "Is that correct?" Yes. "if I ever hire somebody as an employee, should I ask them to sign the operating agreement as well, or is that just for small business owners?" Just for the owners of the business. – ohwilleke Jan 31 at 16:41

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.