Member Managed vs Manager Managed LLC

Hi Gina,

If I'm forming an LLC by myself or with my wife as the other member, do I still need an operating agreement? You said that without an operating agreement, I can do anything I want. Is that a good thing?

"Doing whatever you want" can be a good thing as long as no one ever challenges you. The sad rule is, the longer you're in business, the more likely you are to be sued. Therefore, even single member LLCs should have operating agreements to help mount a defense against an action to pierce the corporate veil. (See the article explaining that concept here: http://bit.ly/iVFYK2). Also, many banks require an operating agreement to open an account, even if the LLC has only one member.

If you're married, you should definitely have an operating agreement in the unfortunate event you and your wife divorce. An operating agreement would dictate how the business is divided or how one spouse's interest can be purchased to ensure the business can continue. Moreover, if you're considering applying for woman-owned business certification, you'll need an operating agreement that endows your wife with management authority in order to qualify.