In Maine, your limited liability company (LLC) is required to have a limited liability company agreement in place. Even though a limited liability company agreement isn’t filed with the state of Maine, the document persists to be an effective way to help avoid disputes and lawsuits that could threaten the stability of your business.
Most states commonly refer to this document as an LLC operating agreement. Read more about the importance of an LLC operating agreement here.
What is a Limited Liability Company Agreement?
A limited liability company agreement is an important legal document that details who owns the business and provides essential information pertaining to member duties. A limited liability company agreement establishes the financial relationship between members and the basics of the working relationships between those members and the managers who oversee daily operations.
Again, the limited liability company agreement is not filed with the state. Instead, it remains a private internal company document. It’s advisable to hire an attorney to ensure your LLC’s agreement is thorough and legally binding.
What Should Your Limited Liability Company Agreement Include?
The limited liability company agreement should clearly define:
- The percentage of each member’s interests in the LLC
- How profits and losses will be allocated to each member
- Each member’s rights and responsibilities
- The management structure and management roles of members
- The voting rights of each member
- Rules for meetings and voting
- What happens when a member sells their interest, becomes disabled, or dies
If the LLC has a board of directors, the company agreement will also include the role and responsibilities of the board members and how they are compensated.
A limited liability company agreement provides legal and financial recourse for a number of situations. If conflicts arise between LLC owners pertaining to any of the above issues, the company agreement will provide clarity.
The specific language of the limited liability company agreement lays out exactly how such conflicts will be resolved, how the business is structured, the dynamics of operations, and more.
Though Maine does have default rules on the books that address some of the issues that might arise between LLC members, your limited liability company agreement would override these default laws and give you greater control.
How Much Does a Limited Liability Company Agreement Cost?
Creating a limited liability company agreement is free if you just draw it up yourself. Alternatively, you can pay for guidance from an online business advisory like ZenBusiness.
This is an extremely important document, so it’s recommended that you hire a professional service or law firm. If you choose to use an attorney to help you create this document, the price will be around $500 for a single-member LLC and $2,500 for a multi-member LLC.
Who Needs my Limited Liability Company Agreement?
One of the key reasons to have a company agreement in place is that it makes your LLC more appealing to financial backers. Banks are likely to request to see your limited liability company agreement when you apply for a loan. If you seek funding from investors, they will also want to see your limited liability company agreement.
Maine legally requires LLCs to create a limited liability company agreement. Even if the state did not require the company agreement, it’s a crucial document that ensures your company is able to access adequate financing and settle any disputes. Remember, you do not file your limited liability company agreement with any state body. You simply need to take certain steps to ensure it’s legally binding and keep it in your records.