Unless the LLC is very small, it is usually best to appoint a person (a member or manager) to manage the business. Most states do not require an LLC enterprise contract (in fact, many states do not require a written enterprise agreement). As a result, the law is fairly silent on what is needed in an enterprise agreement. Whether your business is in a state requiring an enterprise agreement, it is always advisable to have a written enterprise agreement for each LLC. A corporate contract protects your limited liability status, prevents financial and management disputes, and ensures that the LLC is executed according to your wishes and not according to standard state rules. Every business needs a «What if?» – a document that serves as a guide for the process of dealing with ownership and business issues. For limited liability companies (LC), this «what if?» – the document is referred to as the enterprise agreement. A member who retires is generally entitled to return his or her capital contribution to an LLC, unless the resignation is not authorized. Some LLCs instead pay a member deducting the fair value of his or her member interest. The enterprise agreement generally provides for the method of payment of interest of a preferred member. State law also regulates these issues. For accounting purposes, the LLC`s accounting method should be defined in the enterprise agreement.
The property includes the assets of LLC. LLC`s profits and losses are not necessarily its assets and so it is a good idea to specify how LLC`s profits and losses are distributed. As a general rule, ownership units are the distribution shares of LLC. However, the LLC is free to specify its own distribution participation system and should do so expressly as part of the enterprise agreement. The enterprise agreement generally contains procedures for admitting new members, defines the status of the LLC after a member`s withdrawal, and describes thesols procedures for the dissolution of the LLC. Unless national law limits the content of an enterprise agreement, members of an LLC are free to structure the agreement as they see fit. An LLC may, as a general rule, amend or repeal the terms of its enterprise agreement by a vote of its members. In addition to the distribution of LLC`s shares, the enterprise agreement should define the terms of distribution of actual profits and losses to its members. Unlike a company, the profits and losses of an LLC are recorded as proceeds for LLC members.
Whether profits and losses are kept at the LLC or distributed to members, members are responsible for profits and losses. Given this unique circumstance, the enterprise agreement should specify the amount and frequency of profits and losses distributed to members. Members can consider their individual tax class to determine the amount to be distributed (the distribution may be just enough to pay income taxes).