Embarking on the entrepreneurial journey is an exciting milestone, and forming a Limited Liability Company (LLC) in Rhode Island is a strategicchoic ...
Rhode Island LLC Operating Agreement Template
Written by: Coralee Bechteler
Coralee is a business writer with experience in administrative services, education, and software testing.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on July 16, 2022
Updated on May 7, 2023
In Rhode Island, your limited liability company (LLC) is not required to have an operating agreement in place. But it’s highly recommended, as an effective operating agreement can help avoid disputes and lawsuits that could threaten the stability of your LLC.
What is an LLC Operating Agreement?
A Rhode Island LLC operating agreement is an important legal document that details who owns the business and provides essential information pertaining to member duties. An LLC operating agreement establishes the financial relationship between members and the basics of the working relationships between those members and the managers who oversee daily operations.
The operating agreement is not filed with the state of Rhode Island, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.
We’ve provided two operating agreement templates for your use. One is for a single-member LLC if you are the sole member, and the other is for a multi-member LLC if your LLC has two or more members. The documents are customizable and should be adjusted for Rhode Island state and your business. These documents are for your internal use and are not filed with any governing body.
Download FREE Operating Agreement Templates
Disclaimer: These documents may need to be adjusted based on your circumstances and may not cover all situations. Your document also may need to be adjusted over time as your business evolves. These documents should not be considered legal advice. You should have your version of the document reviewed by your attorney to make sure that all necessary provisions are included to fit your business situation.
What Should Your Rhode Island LLC’s Operating Agreement Include?
When drafting an LLC operating agreement in Rhode Island, it’s important to include several key provisions to define the rights, responsibilities, and operational guidelines for your LLC. Here are some elements you should consider including:
- LLC Name and Purpose: Clearly state the name of the LLC and its primary purpose or business activities.
- Members’ Contributions: Outline the capital contributions made by each member, whether in the form of cash, property, or services, and specify the ownership percentage of each member.
- Profit and Loss Allocation: Define how profits and losses will be distributed among the members. This can be based on ownership percentages or other agreed-upon methods.
- Management and Decision-Making: Specify how the LLC will be managed. You can choose either member-managed or manager-managed. If it’s member-managed, clarify the decision-making process and voting rights among members. If it’s manager-managed, outline the role and authority of the designated manager.
- If the LLC has a board of directors, the operating agreement should clearly outline their roles, responsibilities, and authority. It should define the board’s structure, including the number of directors and their appointment or election process.
- Meetings and Voting: Establish guidelines for regular meetings, decision-making procedures, and voting requirements for significant matters. Include provisions for resolving deadlocks or tie votes if necessary.
- Members’ Roles and Responsibilities: Describe the roles, responsibilities, and duties of each member, including any limitations on their authority or activities outside the LLC.
- Transfer of Membership Interest: Determine the process and restrictions for transferring membership interests, including requirements for obtaining consent from other members or the LLC.
- Dissolution or Exit Strategy: Address the procedures and conditions for dissolving the LLC or allowing members to exit voluntarily. Include provisions for distribution of assets and liabilities in the event of dissolution. If a member becomes disabled, or dies, it is essential to have provisions in the operating agreement to address these situations.
- Dispute Resolution: Specify how disputes among members will be resolved, whether through negotiation, mediation, arbitration, or another method.
- Books and Records: Establish guidelines for maintaining accurate financial records and the accessibility of such records to members.
- Amendments: Outline the process for amending the operating agreement, including the level of member consent required for changes.
An LLC operating 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 operating agreement will provide clarity. The specific language of the operating agreement lays out exactly how such conflicts will be resolved, how the business is structured, the dynamics of operations, and more.
Though Rhode Island has default rules on the books that address some of the issues that might arise between LLC members, your LLC operating agreement would override these default laws and give you greater control.
Remember that while these are important provisions, it is highly recommended to consult with an attorney experienced in business law to ensure that your LLC operating agreement complies with Rhode Island state laws and meets the specific needs of your business.
How Much Does an Operating Agreement Cost?
Creating an operating 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 LLC Operating Agreement?
One of the key reasons to have an operating agreement in place is that it makes your LLC more appealing to financial backers. Banks are likely to request to see your operating agreement when you apply for a loan. If you seek funding from investors, they will also want to see your operating agreement.
Though not legally required in Rhode Island, an operating agreement is a crucial document for LLC operations, ensuring your company is able to access adequate financing and settle any disputes. Keep in mind, you do not need to file your operating agreement with any state body. You simply need to take certain steps to ensure it’s legally binding and keep it in your records.
Rhode Island LLC Operating Agreement Template
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