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Swyft Filings is committed to providing accurate, reliable information to help you make informed decisions for your business. That's why our content is written and edited by professional editors, writers, and subject matter experts. Learn more about how Swyft Filings works, our editorial team and standards, what our customers think of us, and more on our trust page.
Kansas business owners must file documentation when registering a limited liability company (LLC). According to Kansas law, business formation includes filling the Articles of Organization with the Kansas Secretary of State and paying a filing fee.[1]
Business owners should also create an LLC operating agreement. This internal document specifies and outlines your business's day-to-day operations while laying out a precise business strategy.
While not compulsory, an operating agreement can benefit any type of LLC, including small businesses. It's important to note that other entities, such as incorporations, won't typically use operating agreements but bylaws.
Key Takeaways
An LLC operating agreement is not compulsory by state laws; however, it is highly beneficial for creating a business plan.
Creating an LLC for your business will protect you and your members from personal liability.
Business owners must specify administrative operations such as membership, voting rights, and member interest within their operating agreement.
Don’t be forced to operate under default state guidelines that don’t fit your business. Shield your assets and set your own rules for your LLC with a proper Operating Agreement.
What Is an LLC Operating Agreement?
An operating agreement is a legal document that outlines your LLC's business plan, rules, members, and regulations. It also specifies and defines the day-to-day processes that make up your business and outlines the members of an LLC and their responsibilities, contributions, and voting rights for decisions.
To make one, it helps to file the Articles of Organization with the Kansas Secretary of State first and receive your Employer Identification Number (EIN) from the IRS.[1] Once your LLC is registered, you'll be able to use the relevant information for your operating agreement.
State Requirements
Before moving on, it's important to note that Kansas state law does not require business owners to create an operating agreement. Instead, it's just essential that business registration complies with the Articles of Organization and the Limited Liability Company Act.[2]
This Kansas statute outlines some things you'll need for any Kansas business entity formation. Some of the information includes a distinguishable business name, industry, and amendments.
LLC Operating Agreement Benefits
You might ask how your LLC can benefit from creating a Kansas LLC Operating Agreement. Let's take a look at just a few ways it can help almost any business entity:
Protects you from personal liability: An operating agreement legally distinguishes between the business owners and members and the LLC as an entity. This limited liability status ensures that your assets are protected if the LLC accumulates debt.
Outlines a specific business plan: An operating agreement helps your business entity define its day-to-day operations. All members must agree and sign the document once complete for it to be official.
Lets you customize your policy: Without an operating agreement, your LLC must abide by default state rules regarding decision-making. This can be inefficient as it will require consulting these laws for every critical decision.
Puts all your business information in one document: When an operating agreement is complete, you'll have most of your business information in one place, such as your business bank account and Employer Identification Number.
Who Needs an Operating Agreement?
An operating agreement will benefit all single- and multi-member LLCs because they form a coherent and specific business plan, protecting the LLC formation from falling under state default rules. This also includes foreign LLCs operating within Kansas.
Both big and small businesses will benefit from an operating agreement because it clearly defines management structure. It introduces legal organization for day-to-day operations, making doing business more efficient.
S corps handle income, deductions, and losses through shareholders. Because of this, they can also benefit from creating detailed operational agreements for their business structure.
While any LLC formation and Kansas limited liability company will benefit from an operational agreement, some businesses do not. For example, incorporations tend to have bylaws rather than operating agreements. Similarly, sole proprietorships are controlled by the owner with no distinction between the business and the owner.
Drafting Your Kansas LLC Operating Agreement
Once you understand the benefits of an LLC operating agreement, you'll need to collect the necessary information for drafting one. Many processes and legal terms are included in this document, so it's best to obtain professional legal advice before beginning.
Before starting an operating agreement, here are a few things you'll need:
Registered business that’s compliant with the Articles of Organization
Basic information for your business, such as your LLC name
Operating agreement template for drafting and organizing information (optional)
Employer Identification Number (EIN) obtained from the IRS
Step 1: Provide Business Information
Making a useful LLC operating agreement first starts with collecting the relevant information. Collect the relevant details before beginning the process or registering the business. This way, you'll have everything ready to go when needed.
Important information for your operating agreement includes:
Place of business
Registered office
Company name
Employer Identification Number (EIN)
Once you've collected the above information, you can move on to more complex aspects of the operating agreement, such as administrative processes and membership.
Step 2: List LLC Members
Listing off all the members of your LLC is perhaps the most important aspect of your operating agreement. You should list every person mentioned in the LLC. Once the names are there, you can specify some of their responsibilities and roles within the business.
This section will also be closely tied with administrative operations that specify how you run your business. This is because members need to make decisions. They must be assigned things like member contributions, voting rights, and ownership percentages.
Make sure to discuss this with your members. Together, you can define the company's affairs and how you conduct business before finalizing it with a written operating agreement.
Keeping members in your operating agreement also protects them and their assets from personal liability. If you don't have any members, you can draft a single-member operating agreement stating you are a single-member LLC instead of a multi-member LLC.
Step 3: Decide Member-Managed vs. Manager-Managed
The company's management is another vital aspect of your LLC operating agreement. It's also key for protecting your business's future. You can clearly define the management structure for your multi-member LLC in two different ways:
Member-managed structure: With this LLC management structure, each member makes decisions while conducting business within the LLC. Members will have voting rights for controlling day-to-day operations and can decide the outcome amongst themselves.
Manager-managed structure: Sometimes, certain members won't be proactive in decision-making. Instead, they hire a manager to do so for them. The manager can make company decisions instead of the members themselves. This is common practice with very large LLCs when the members can't be physically present.
If you're a single-member LLC, you'll be a member-managed structure by default. However, you can still hire managers if you aren't present. After the management structure is specified, you can move on to administrative operations necessary for your Kansas LLC to stay up and running.
Step 4: Layout Administrative Operations
Once you start an LLC, you must form a coherent business plan for all your administrative operations. Your members will also have specific requirements that will need addressing. As a business owner, it's best to align with them so that you can all conduct business on the same page.
Some of these administrative operations in the internal document are:
Allocations: Members will distribute earnings, profits, and losses among themselves. You need a clear distribution method and agreement on dividing financials.
Capital contributions: Your LLC can get a jumpstart when members make capital contributions. They serve to fund the affairs of the company. Some owners will base voting rights on these contributions.
Business bank account: Every business needs an operating bank account. This will serve for tax purposes, such as filing annual reports with the IRS.
Voting rights: Members will frequently need to vote to make day-to-day decisions. Make sure to discuss this topic with members to make sure the process goes smoothly.
Step 5: Add and Remove LLC Members
The final step for making an operating agreement for your LLC includes amendments. The most common case would be adding or removing members from the agreement. However, adjusting members is just the start of the process.
The whole document must also reflect the member changes. You might need to adjust the remaining members' voting rights, contributions, and interests.
For example, a buyout might result in losing a member and varying ownership percentages for others. Adding a new member might imply further indemnification or personal liability processes. Once the new document is drafted, you must finalize it by having all members sign.
Create Your Operating Agreement Through a Filing Service
Drafting an LLC operating agreement can be time-consuming and inconvenient. You'll need to collect lots of information and specify your business operations.
Our LLC operating agreement service ensures you have a compliant document for conducting business in Kansas. File for your LLC through us today and include our LLC operating agreement add-on in your cart to ensure all your necessary documents are completed at the beginning.
Set Your Own Rules: An operating agreement is your company’s founding document. Govern your business by your own guidelines, not the state’s.
Resolve Disputes: Set a binding agreement about the fundamentals of your business, covering ownership, rights, and responsibilities.
Protect Your LLC Status: Put a barrier between your personal assets and business liabilities.
FAQs
Is an LLC operating agreement required in Kansas?
No, an LLC operating agreement is not required in Kansas. However, drafting one would protect your business from falling under default laws. It also covers your liability.
How does an LLC operating agreement help protect my assets?
An operating agreement distinguishes between you and the business entity or your LLC. This protects you from personal liability. If the LLC accumulates debts, your assets will be protected.
Who needs access to an operating agreement once it's drafted?
An operating agreement is a personal and internal document. That means you won't have to file it with the Secretary of State. All LLC members should have access to it.
How do I edit information on an operating agreement if membership changes?
If you want to introduce changes in membership, you'll need to amend your operating agreement. Ensure the document fully reflects these changes and includes adjustments to voting rights and membership interests. Once complete, all members must sign the document.
What other legal documents must be drafted for my Kansas LLC?
You'll need to register your LLC with the Secretary of State by submitting Articles of Organization. Business owners also need to obtain their Employer Identification Number for taxation purposes.
Bibliography
Kansas Secretary of State. "Kansas Series Limited Liability Company Articles of Organization." Accessed June 21, 2023.
IRS. "Topic No. 755, Employer Identification Number (EIN) – How to Apply" Accessed June 21, 2023.
Kansas Legislative Sessions. "2019 Statute." Accessed June 21, 2023.
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