Maine LLC Operating Agreement: Drafting Checklist

Getting a limited liability company (LLC) up and running in Maine can be challenging. There are several steps that an aspiring founder must take, including incorporating your business with the state and filing vital legal documents.[1]

One particularly significant document is the LLC operating agreement. It dictates in detail how your company will run. If you’re forming a Maine business, getting familiar with the state law and the requirements for building an LLC operating agreement is essential to starting a successful company.

Key Takeaways

• An LLC operating agreement is a legal document that outlines your LLC’s operating procedures and ownership structure.

• In Maine, having an LLC operating agreement is beneficial for clarifying the roles and responsibilities within your small business.

• A filing service offers an affordable and reliable strategy for creating your Maine LLC operating agreement.

What Is an LLC Operating Agreement?

An LLC operating agreement is a legal document that outlines the structure and operations of your Maine limited liability company. It consists of information like the members’ names, their roles, how to distribute profits and losses, and other details about management.

This agreement is vital to forming your business, even if you only have one member in your LLC or a multi-member LLC. This agreement should be ready at the same time as filing the Articles of Organization for Maine LLCs.

State Requirements

The Maine Secretary of State’s Division of Corporations doesn’t mandate an LLC to have an operating agreement. However, it is highly recommended for every Maine business to have one. It’s a document that guides the company without having to fall back on default state laws.

Maine state law will step in and govern how the LLC operates through a dispute without an operating agreement. These default rules may not necessarily align with the specific preferences of the LLC members. For instance, state rules might dictate how to distribute profits among members, which might not align with the members’ wishes.

If an LLC in Maine decides to have an operating agreement, the law doesn’t require filing it with the Secretary of State. As far as the state is concerned, it’s an internal document that belongs in the company’s records.

This business-friendly and lenient law grants LLCs in Maine the flexibility to create and modify their operating agreement without state approval or filing. However, the operating agreement must comply with applicable state laws to avoid legal complications.

LLC Operating Agreement Benefits

• Helps establish your LLC as a separate legal entity. This way, you’re protecting personal assets such as homes, cars, and savings from business liabilities in case of lawsuits or debts.

• Outlines the members’ rights and responsibilities by serving as a legal roadmap. It provides guidelines for making business decisions and preventing member disputes and misunderstandings.

• Simplifies opening a business bank account, as most banks require it as part of the documentation. Start your business’s finances on the right foot by separating personal and company funds.

• Makes it possible to adjust the rules and structure of your LLC in a non-default manner. This is beneficial if the default state laws don’t fit how you want to run your business. It gives the members more control over the business operations.

• Boosts a company’s credibility with investors, partners, and vendors. It demonstrates that your business is professional and has well-defined governance structures.

• Sets the procedures for what happens if a member wants or has to leave the business or a new member wants to join. Ownership transitions are less disruptive to the company, with an operating agreement clearly stating the procedures for these situations.

• Includes provisions for how the LLC will file taxes to the IRS, granting the company some tax flexibility. An LLC can pay taxes as a sole proprietorship, partnership, or corporation. This differentiation can be beneficial for tax planning.

• Specifies how to divide profits and losses among members. That keeps financial matters clear.

• Resolves disagreements between members with its content. It could prevent costly and time-consuming litigation.

• Protects the rights and interests of minority members. This document gives them fair treatment and prevents abuses by majority members.

Who Needs an Operating Agreement?

Every Maine LLC would be better off with an operating agreement, no matter its business structure or size. This applies not only to Maine-based businesses like single-member LLCs, multi-member LLCs, and corporations (S-Corp) but everywhere in general.

Drafting Your Maine LLC Operating Agreement

Creating an LLC operating agreement is a big step for transforming a business from an idea into reality. To ensure the document complies with state law, you must prepare several pieces of information beforehand.

You have two options for starting: draft it from scratch or take the easier route and use an operating agreement template. Regardless of your choice, review this checklist so that your agreement covers all the necessary areas.

Step 1: Provide Business Information

Include basic information such as the official business name, location, industry, registered agent, and street address.

Of course, the LLC name must comply with Maine’s naming standards, which usually means including “LLC” or “limited liability company” in the name. You can use a name search tool if you are unsure of a name’s availability in the state. Alternatively, check the business name’s availability through Maine’s business name database to see if it’s already in use.

Including the purpose of the business and its primary activities can also benefit clarity and legal compliance. If the LLC has a specific duration or expiration date, mention this information.

Step 2: List LLC Members

List all business owners, their roles, responsibilities, and how much of the company they own. For a single-member LLC, specify the sole owner. For a multi-member LLC, list all members and what they bring to the table, including capital contributions and services.

It’s also a good idea to include contact information for each member and mention if they get any particular rights or privileges, for example, veto power or priority in distributions. This step defines the LLC’s structure and lets all members know what they give or take.

Step 3: Decide Member-managed vs Manager-managed

In this step, you pick whether your LLC will be member-managed or manager-managed. Member-managed means all members are involved in day-to-day operations, while manager-managed means a designated manager or group handles daily operations. Define the scope of authority and decision-making powers explicitly for managers in a manager-managed LLC and how managers are appointed or removed.[2]

This structure you choose will affect how the business runs and how decisions are made for it, so you should consider it carefully and discuss it with legal counsel if you need help.

Step 4: Lay Out Administrative Operations

Describe how to handle situations such as tax clarifications, profits and losses, annual reports, and member meetings. The description should include details on how and when meetings happen, what constitutes a quorum, how to count votes, and how to keep records of the meetings.

Also, outline the process for amending the operating agreement, if necessary, and the procedure for handling member disputes. It’s also wise to include provisions for compliance with state and federal regulations, including tax obligations.

Step 5: Add and Remove LLC Members

Explain the procedure for adding new members and removing existing ones. Include details on buyouts, membership interest, and how you will decide to add or remove members. Likewise, if a member leaves, address how to split their share and under what circumstances you can remove a member.

If you can include more rules at this stage, consider adding a right of first refusal clause. This clause allows existing members to purchase a departing member’s interest before it’s available to an outside party.

Create Your Operating Agreement Through a Filing Service

Now that you know how to start an LLC and all the intricacies of drafting an LLC operating agreement, consider letting a filing service create this document for you. Swyft Filings’ services are reliable and one of the most affordable among competitors.

For potential business owners, include the LLC operating agreement service as an add-on when you file for your LLC through Swyft Filings.

New business owners who have already formed their LLCs can still use our service to ensure you have all the necessary legal documents in place.

By choosing Swyft Filings, you can focus on what you know best: running your business.

FAQs

Is an LLC Operating Agreement required in Maine?

No, it isn’t required according to Maine state law. It’s a good idea if you want to be clear about how to run your business and preserve your rights as its owner. An LLC operating agreement can protect you from potential conflicts or misunderstandings between business owners. It also provides everyone running the business with well-defined expectations for their responsibilities.

How does an LLC Operating Agreement help protect my assets?

An LLC operating agreement legally protects your personal assets and separates them from the business ones. If your business incurs any debts or liabilities, you don’t have to worry about them impacting your personal possessions. In effect, you give yourself peace of mind, knowing that your livelihood can stay safe even if something goes wrong with the business.

Who needs access to this document once it’s drafted?

Every shareholder of the LLC should have access to this document, and you should store it safely alongside other pivotal business documentation. Your legal counsel may also need a copy.

How do I edit information on this document if membership changes?

The operating agreement should include directives on how to amend it. Usually, the LLC members need to accept any adjustments unanimously, which should be documented in written form. All modifications must abide by the rules in the agreement for everyone involved. That way, everyone is on the same page when making changes.

What other legal documents do I need to draft for my Maine LLC?

Apart from the operating agreement, you’ll need a few other things before getting your business up and running. The Certificate of Formation,[3] Employer Identification Number (EIN), and business licenses and permits are also necessary.

Bibliography

1. Maine.gov. “Limited Liability Companies.” Accessed June 26, 2023.

2. Maine Legislature. “Subchapter 2: LIMITED LIABILITY COMPANY AGREEMENT.” Accessed June 26, 2023.

3. Maine Legislature. “Subchapter 3: FORMATION, CERTIFICATE OF FORMATION AND OTHER FILINGS.” Accessed June 26, 2023.