Question about a Limited Liability Company

[Marc Knobler]

II am think of starting a LLC in the state of New York. It will be run by
only one member, myself.

Is it necessary that I draw up an operating agrrement since I am the only
member of the LLC.

Thanks,

Marc

[Robert C. Rice]

An LLC is a creature of statute and so you must comply with New York law
(assuming you are going to use New York as the place where it would be
organized) to be sure you have validly created an LLC. You should also
check to see if there are franchise taxes required to be paid on some
sort of periodic basis to New York if you do create one and how much are
the taxes required to be paid? I do not know the proper location to do
this in New York because I am not from there. Best of all check with an
attorney from New York to get this done for you.

Bob

[Marc Knobler]

Thank you for your reply. I think you misunderstood my question so I'll try
and re-phrase it.
The Articles of organization is the paperwork that is needed to start a LLC
and is filed with the Secretary of State.
The Operating Agreement is like a partnership agreement.
My question is that since there will only be on member, (myself) in this LLC
is it necessary for me to draw out a Operating Agreement?

Thanks,
Marc

[McGyver]

I don't know whether NY law requires you to have an operating
agreement, but I recommend that you have one regardless. The
operating agreement is the LLC equivalent of corporate bylaws.
The primary purpose of having a corporation or LLC as your form
of business is limitation of liability. If some plaintiff
someday claims that your LLC was a sham, that the business was
really just a proprietorship and that you ignored the LLC after
it's formation and ran the business like a proprietorship, you
will have to show that the LLC owned and operated the business
and that your actions and decisions were in your role as member.
That will be harder for you to sell if you have not adopted some
mechanism for making decisions. Ir's true that the key element
of the LLC is that the members have no personal liability for LLC
debts regardless of the lack of formalities in maintaining the
LLC. But I wouldn't trust that proposition totally. You still
have to prove that suppliers were relying on the LLC's credit and
not your personal credit, and that when you ran over the dog or
whatever, you were acting as a member of the LLC and not as an
individual. It sounds silly to have an agreement with yourself,
right? But just adopt it as you would bylaws. And keep minutes
of all executive actions.

McGyver
http://www.DavidPhipps.com