Vermont LLC Operating Agreement Template

In Vermont, 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 Vermont 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, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.

What Should Your Vermont LLC’s Operating Agreement Include?

The operating agreement should clearly define:

1. Name of the LLC: Clearly state the full name of the limited liability company as registered with the Vermont Secretary of State.
2. Purpose of the LLC: Describe the primary business activities and objectives of the LLC.
3. Duration of the LLC: Specify whether the LLC has a predetermined end date or if it will continue indefinitely.
4. Registered Agent and Office: Provide the name and contact information of the registered agent and office in Vermont.
5. Member Information: List the names, addresses, and contributions of each member, including any initial capital contributions.
6. Percentage of each member’s interests in the LLC: Clearly define the ownership percentage each member holds based on their capital contributions or other agreements.
7. How profits and losses will be allocated to each member: Detail the method for distributing profits and losses among members, typically in proportion to their ownership interests.
8. Each member’s rights and responsibilities: Outline the roles, responsibilities, and authority of each member, including decision-making and day-to-day management.
9. Management structure and management roles of members: Specify whether the LLC will be member-managed or manager-managed and provide a description of the management roles and responsibilities.
10. The voting rights of each member: Clearly define the voting rights of each member, including any voting thresholds required for decision-making.
11. Rules for meetings and voting: Establish guidelines for holding meetings, notice requirements, quorum, and voting procedures.
12. What happens when a member sells their interest, becomes disabled, or dies: Include provisions addressing buyouts, transfers, and the treatment of membership interests in cases of death, disability, or other events.
13. Capital Contributions and Additional Capital: Describe the process for members to make additional capital contributions and the resulting adjustments to their ownership interests.
14. Distributions: Define the timing and method for distributing profits to members.
15. Recordkeeping: Outline the recordkeeping requirements for the LLC and the process for members to access and inspect records.
16. Taxation: Specify the LLC’s tax classification (e.g., partnership, corporation, or disregarded entity) and any relevant tax-related provisions.
17. Amendments: Describe the process for amending the Operating Agreement, including the required approval thresholds.
18. Dissolution and Winding Up: Provide the circumstances under which the LLC may be dissolved, as well as the procedures for winding up the business and distributing assets.
19. Dispute Resolution: Include provisions for resolving disputes among members, such as mediation, arbitration, or other methods.
20. Governing Law: State that the Operating Agreement and any disputes arising from it will be governed by the laws of Vermont.
21. Severability: Include a clause stating that if any part of the Operating Agreement is found to be invalid, the remaining provisions will still be enforceable.
22. Entire Agreement: Clarify that the Operating Agreement represents the entire understanding between the members and supersedes any previous agreements or understandings.
23. Signatures: Ensure that all members sign and date the Operating Agreement.

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 Vermont 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.

It’s essential to consult with an attorney when creating an Operating Agreement to ensure it complies with Vermont law and addresses the unique needs of your LLC.

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. 

Conclusion 

Though not legally required in Vermont, 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. 

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