Who Really Runs the Business? Operating Agreements
- 5 days ago
- 2 min read
In Georgia, a business operating agreement (usually for an Limited Liability Company (LLC)) establishes the internal rules for how the company is owned, managed, and operated. While Georgia does not require an LLC to file the operating agreement with the state, it is one of the most important legal documents for the business.
Here are the main things an operating agreement establishes:
1. Ownership Structure
It identifies:
The members (owners) of the LLC
Each member’s percentage of ownership
Each member’s capital contributions (money, property, or services)
Example:Member A owns 60%, Member B owns 40%.
2. Management Authority
The agreement establishes who has authority to run the business.
It defines whether the LLC is:
Member-managed – owners run the business
Manager-managed – a designated manager runs operations
This section also explains:
Who can sign contracts
Who can make financial decisions
3. Voting Rights and Decision-Making
It sets rules for how decisions are made, including:
Voting percentages required for major decisions
What requires a majority vote vs. unanimous consent
Examples of major decisions:
Taking on debt
Adding new members
Selling the business
4. Profit and Loss Distribution
The operating agreement explains how profits and losses are shared among members.
This may be:
Based on ownership percentage, or
A different agreed distribution.
5. Member Duties and Responsibilities
It outlines:
Roles of each member
Expectations for participation in the business
Compensation (if any)
6. Adding or Removing Members
The agreement sets the rules for:
Admitting new members
What happens if a member leaves, dies, or wants to sell their interest
This prevents disputes later.
7. Liability and Legal Protection
The operating agreement helps reinforce the limited liability protection of an LLC by showing the business operates separately from the owners.
This is recognized under the Georgia Limited Liability Company Act.
8. Dissolution or Exit Plan
It establishes how the business will be closed if needed, including:
Voting requirements for dissolution
How assets will be distributed
✅ In simple terms:An operating agreement is the rulebook for the LLC. It protects the owners, clarifies authority, and helps prevent internal disputes.
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