The One Document Every Business Owner Needs (Hint: It’s Not What You Think)

When you think about essential documents for your business, things like contracts, licenses, or tax forms might come to mind. But there’s one often-overlooked document that can make or break your business, especially when things go wrong or start to grow fast: An Operating Agreement.

Even if you’re a solo entrepreneur or running a small LLC, an operating agreement is the foundational document that protects your business and you.

What Is an Operating Agreement?

An operating agreement is a legal document that outlines how your limited liability company (LLC) will be run. It defines the roles and responsibilities of each member, how profits and losses will be divided, what happens if someone leaves the business, and how disputes will be handled.

Think of it as the “rulebook” for your business.

Why It Matters (Even If You’re a Single-Member LLC)

Most people assume they don’t need an operating agreement if they’re the only owner. But that’s a dangerous assumption. Without one, your business is subject to your state’s default rules, which may not align with how you actually want to run your business.

Here’s what an operating agreement can do for you:

• Prove separation between you and your business (crucial for liability protection)

• Clarify decision-making processes

• Protect your interests if you add partners later

• Prevent costly legal battles if disputes arise

• Make your business more attractive to banks and investors

  
  

Even for solo owners, it shows professionalism, planning, and protects your limited liability status in court.

What Happens Without One?

Let’s say you go into business with a friend, and things are great at first. You split everything 50/50 until your friend stops showing up, and suddenly you’re doing all the work. Without an operating agreement, it’s unclear how profits should be divided or how ownership can be changed. Now you're stuck in a legal mess you never saw coming.

Or maybe you’re a single-member LLC applying for a small business loan. The bank wants to see your operating agreement to confirm your ownership and structure, but you don’t have one. Now your funding is delayed, or worse, denied.

What Should Be in Yours?

Every operating agreement should be customized to your business, but it typically includes:

• Member names and ownership percentages

• Voting rights and management structure

• Rules for admitting new members or removing old ones

• Profit distribution guidelines

• Procedures for resolving disputes

• Steps for dissolving the business

  
  

Don’t Wait Until There’s a Problem

The best time to draft an operating agreement is at the beginning, not when you’re already in conflict or scrambling to raise capital. At Brinkley Law, we focus in helping entrepreneurs build a solid legal foundation for long-term success.

Need help drafting or reviewing your operating agreement? Contact Brinkley Law today and protect your business from the start.