Virginia LLC Operating Agreement

Usually, a person willing to launch a business entity has plenty of questions regarding the minimal requirements for documents applicable to this type of enterprise. A limited liability company (LLC) is one of the most popular types of business formations in the US. One of its primary benefits is that it requires very few documents. One of the documentation package items is an LLC operating agreement that shows how the company is managed and records relationships between its proprietors. Thus, it is a vital document that you are advised to create even if the state doesn’t officially demand that you have it.

Depending on the number of members in an LLC, you can choose from the two main types of operating covenants:

  • Single-Member LLC Operating Agreement. Sole business owners typically use this type of document to protect their personal assets from liability imposed on the company. The paper outlines the subject business entity’s primary purpose, basic management strategies, and business policies.
  • Multi-Member LLC Operating Agreement. Multi-member agreements are created when an LLC has more than one member. It contains administration principles and other necessary information about the entity and the financial and business relations of the shareholders and their expectations. Just like a sole-member agreement, this document also protects the LLC members’ personal belongings from any financial liability in case of possible business failures such as bankruptcy or indebtedness. To draw the paper or revise it, all active Board members must approve.

The state of Virginia does not have a standard Operating Agreement template. Therefore, you are allowed to use any template available on the Internet or create one of your own. However,  we encourage you to use our advanced form-building software to generate one.

Once you have found a relevant agreement form, make sure to provide all the essential details. If you are generating your own template, ensure that it has the following structure:

  • Introduction to the Agreement. At the beginning of the document, enter the agreement’s effective date and specify whether it is a single-member or multi-member agreement.
  • LLC’s Description. In this part of the document, enter your company’s name, address, formation dates, why it exists, and what type of business activity it conducts.
  • Owners’ Details. If several members manage your LLC, you ought to indicate the amount of money they have invested, their interests, rights, and respective duties.
  • Management Principles. Include the details related to the assignment of interest, dates of the company’s major meetings, admission of new members, withdrawals, and other relevant information.
  • Tax Matters. Outline the rules of conducting tax operations and revenue sharing. Traditionally, income tax and information returns are filed with the IRS.
  • Dissolution Conditions. In this section, state conditions under which the company is dissolved or liquidated.
  • Acknowledgment. The validity of the document is proved by the owner(s)’ signature(s). The signatures also show that all the members agree to all the document terms.

You are welcome to include other sections suitable for your type of business company. If you have any doubts about including specific information, consult with your attorney.

Virginia LLC Laws and Definition

A smaller amount of paperwork is not the only reason people turn to limited liability companies when establishing business companies. Its name implies another significant advantage of such business formation. All LLCs guarantee that their members will not be personally liable for the company’s debts and remedies. If someone sues your LLC, its members are unlikely to lose their personal assets ( cars, apartments, houses, bank accounts). As long as your LLC is separate from your finances, you can be liable only for your wrongful actions and violations of the operating agreement. Furthermore, like a sole proprietorship, LLC is exempt from double taxation typical for large corporations.

Depending on the state where the company is established, an LLC can be domestic or foreign.  If your company is registered as an LLC in Virginia and provides services for Virginia residents, your company is called a domestic LLC. If you desire to expand your business, offer your services, and hold offices outside the state, you need to register it as a foreign LLC in that particular state.

We have covered only a few issues related to LLCs. To better understand how this type of business entity works and what requirements you should need, visit the Virginia Legislation System official website and check out Title 13.1, Chapter 12 of the Virginia Code regulating entities with limited liabilities and related issues.

Before you dig into all the LLC peculiarities, make sure you understand all the terms you contained in these statutes. For instance, Section 13.1-1002 comprises the list of definitions on various LLC-related topics, from the “Articles of Organization” to the “Operating Agreement.” This section will help you make the formation process clearer.

Section 13.1-1023 is dedicated to operating agreements. Specifically, it touches on their purpose, amendment requirements, and enforcement of such documents. Following this section, an operating agreement cannot be created if one of the members doesn’t consent. If you want to make any changes, discuss them with the business co-owners first.

The guide below introduces other relevant statutes from Chapter 12 to simplify your registration process.

Steps to Forming an LLC in Virginia

We have prepared some instructions on how to start an LLC in Virginia. We hope that our guide will make the process transparent and less time-consuming for you.

Name Your Enterprise

The first important step you should take to bring your entity to life is choosing its name. Without a unique name, you are not allowed to establish a company. Apart from being distinguishable, the title must indicate that the company belongs to entities with limited liability. Thus, ensure you add such abbreviations as LLC, L.L.C. (with periods following each letter), or the phrase “limited liability company.”

Nowadays, you can check if another company or corporation has already taken the chosen name online from the State of Virginia’s official website.

Appoint a Registered Agent

The process of choosing a registered agent is regulated by Section 13.1-1015 of the State Code. This section also contains the main requirements concerning the registered agent. The agent has to have a physical address in the state and receive mail, court documents, and other paperwork from the state on behalf of the company.

A business owner can act as the registered agent for the LLC or designate one of the company’s members, as long as they meet the state criteria. You can even use your personal home address if you run the business from home. Another option is to use the services of registered companies.

File the Articles of Organization

Another essential document to file with the Secretary of State is the Articles of Organization. If you fail to do this, you will not have your LLC registered. You can download the form online and send it via mail or apply on the official website.

To find out the information you need to include in the document, check out Section 13.1-1011 of the State Law. Before completing the paper, define whether your entity is member or manager-managed. Keep in mind that you will have to pay $100 as filing fees.

Draw an Operating Agreement

We have provided information on the operating agreements above and emphasized this internal document’s importance for every LLC. The paper eliminates any disputes between the members (in multi-member LLCs) and protects the owner(s) from financial losses and damages in case of lawsuits.

Get a Tax ID Number

A tax ID number (also referred to as Employer Identification Number or EIN) is mandatory if your business entity has more than one employee and you want to have a legal right to perform the following actions:

  • Control your taxes
  • Employ new workers
  • Participate in bank transactions
  • Open a business bank account
  • Perform other relevant legal procedures

The process will not require much time. All you need to do is submit Form SS-4 to the IRS by mail or fax or apply online.

Published: Mar 24, 2021