West Virginia LLC Operating Agreement

In West Virginia, 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 West Virginia 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 West Virginia LLC’s Operating Agreement Include?

The operating agreement should clearly define:

1. Percent of Ownership: This section outlines each member’s ownership interest in the LLC, usually expressed as a percentage. It should clearly state how ownership is distributed among the members, which determines their share of profits, losses, and voting rights.
2. LLC Management Structure: Detail whether the LLC will be member-managed or manager-managed. In a member-managed structure, all members participate in decision-making, while in a manager-managed structure, one or more designated managers are responsible for making decisions.
3. Members’ Roles and Responsibilities/Decision Making: Describe each member’s roles, responsibilities, and authority in the LLC. Clarify the decision-making process, including voting rights, required majority for decisions, and how to handle deadlocks.
4. Capital Contributions and Distributions: Outline the initial capital contributions made by each member and any additional contributions required in the future. Specify how profits and losses will be allocated and distributed among the members, including the timing and frequency of distributions.
5. Record Keeping and Financial Reporting: Detail the LLC’s record-keeping and financial reporting requirements, including the maintenance of financial records, preparation of annual financial statements, and any auditing procedures.
6. Tax Classification: Specify the LLC’s tax classification, such as a disregarded entity, partnership, or corporation, as well as the relevant tax reporting and filing requirements.
7. Member Meetings: Include provisions for holding regular and special member meetings, such as the frequency, notice requirements, quorum, and voting rules.
8. Admission and Removal of Members: Establish the process for admitting new members, including any required approvals, buy-in procedures, and adjustments to ownership percentages. Also, define the conditions and procedures for the voluntary or involuntary removal of members.
9. Transfer of Ownership: Outline the rules and restrictions for transferring ownership interests, including rights of first refusal, buy-sell provisions, and consent requirements.
10. Dispute Resolution: Include a dispute resolution process to handle conflicts among members, such as mediation, arbitration, or litigation, and specify the governing law and jurisdiction.
11. LLC Dissolution: Define the conditions and procedures for dissolving the LLC, including the distribution of assets, winding up of business affairs, and filing requirements with the West Virginia Secretary of State.
12. Amendments to the Operating Agreement: Specify the process for amending the operating agreement, including any required notice, member approvals, and the effective date of amendments.

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 West Virginia 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.  

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 West Virginia, 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.