LLC Terms

• An operating agreement states the terms of an LLC. Winston Davidian/Photodisc/Getty Images

  Limited liability companies (LLC) are business structures formed according to individual state laws and require an LLC agreement and an Articles of Organization form. These forms state the specific details of the LLC business arrangement including the terms and conditions regarding the operations of the business. LLCs must have an organizer, a registered agent and board members.

Articles of Organization

• The Articles of Organization is a form LLCs file with the Secretary of State. These articles control the LLC and override any information contained within the LLCs operating agreement. The articles contain the legal name of the LLC, including the abbreviation LLC after the business name. It also includes the business's mailing address, names of members and the named registered agent. All LLCs require a registered agent who is a person named to handle important details of the business, such as receiving important documents like tax notices. The articles also contain the period of duration of the business and the LLCs organizer's name and signature.

Operating Agreement

• LLC's do not require operating agreements, but they are very useful and help with preventative problems in the organization. The operating agreements contain basic member information along with all terms of the business arrangement. This agreement lists all members' names and addresses along with the management structure for operating the LLC. It also lists each member's contribution to the business along with the fair market value of each contribution.

Operating Provisions

• An operating agreement is also used for stating important profit and loss allocations, tax treatments and resolution issues. The agreement states which accounting methods the business will implement as well as tax treatment issues. An important aspect of the agreement is stating each member's percentage of ownership rights as well as the way profits and losses are allocated among members. It also describes the appointment process of officers within the organization and the frequency of company meetings and member voting powers. Other terms listed are often in regards to the dissolution of the LLC; resolution procedures; and duties, rights and obligations of each member individually.