Why the first draft matters most
An operating agreement is the rulebook for a company that has not had its first argument yet. That is exactly why it is the right time to write it carefully.
Once a business has revenue, customers and a reputation, every clause becomes a negotiation about money. In the first month, the same clause is a conversation about fairness. Founders who use that window well rarely need a lawyer to referee them later.
Decision rights
List the decisions that matter: hiring a senior employee, signing a lease, borrowing money, admitting a new owner, selling the company. For each one, decide whether a manager can act alone, whether a majority is needed, or whether every owner must agree. Unanimous consent sounds safe but it hands every owner a veto.
Exits and buyouts
A simple exit sequence
- Define the triggering events: resignation, disability, death, divorce, breach
- Set a valuation method that does not require a lawsuit to apply
- Fund the buyout with insurance, installments or both
- Give the remaining owners a right of first refusal
The clause you agree on while everyone is optimistic is the one that saves the friendship later.
New money
Capital calls, outside investors and loans from owners all change the balance of ownership. Write down whether owners must contribute more, what happens if one cannot, and whether a new investor can be admitted without everyone signing.
| Question | Common answer | What to watch |
|---|---|---|
| Who signs contracts? | Managers up to a set amount | Set the amount in writing |
| Can an owner be removed? | Only for defined cause | Define cause narrowly |
| How is a departing share valued? | Formula or appraiser | Avoid "fair value" alone |
Questions owners ask
Do single-owner companies need an operating agreement?
Yes. It supports liability protection and tells a bank or buyer how the company is run.
Can we change the agreement later?
Usually, by the vote the agreement itself requires, which is one more reason to set that threshold deliberately.
General information only, not legal advice for any specific situation.
