Nebraska LLC Operating Agreement: Drafting Checklist

Regardless of the type of business entity you’re creating for your Nebraska business, you must file specific paperwork. For limited liability companies (LLCs) in Nebraska, you should provide the following information to ensure the smooth launching of your business and its subsequent operations:

• A unique and distinguishable business name compliant with Nebraska Revised Statute 21-108[1]

• The name and other information about your registered agent

• Certificate of Organization and Incorporation with an LLC filing fee of $100 or $110 if in-office[2]

• An Employer Identification Number (EIN) from the Internal Revenue Service (IRS)

• Business licenses and permits that enable your business to render a specific professional service, depending on the type of your business

You can file all this business information online or drop it off at the Nebraska Secretary of State (P.O. Box 94608, Lincoln, NE 68509-4608).

Another legal document your Nebraska LLC will benefit from in the long run is an LLC operating agreement. As per state law, a Nebraska LLC operating agreement isn’t mandatory, but big and small businesses are encouraged to file one early in the business formation process.

Read on to find out why an operating agreement benefits your Nebraska business and how to draft one.

Key Takeaways

• An LLC operating agreement sets the status of your business as an LLC and establishes the rules and processes necessary for its operation.

• Nebraska state law doesn’t require a Nebraska LLC operating agreement, but your small business will benefit from it in many ways.

• Since drafting an operating agreement entails several steps that could overwhelm a new business owner, using a professional filing service like Swyft Filings is advised.

What Is an LLC Operating Agreement?

Before you get into the drafting process of your operating agreement, it’s vital to know what this legal document is, who has a say in its creation, how it helps your business, and which business entities need it.

Unlike the Certificate of Organization, which is necessary for your LLC formation and to run your business, an operating agreement is an internal document that serves only you and your company members. An operating agreement includes the information in your Certificate of Organization, such as the company name, type of business, your Employer Identification Number (EIN), and the names of the members and managers.

However, apart from that information, it includes each member’s ownership percentage, voting rights, responsibilities, capital contributions, profits, losses, and distributions. In addition, an operating agreement spells out the rules and processes in the event of internal disputes, lawsuits, membership or ownership changes, indemnification, liquidation, and dissolution of the company.

State Requirements

Nebraska state law doesn’t require LLCs to draft an operating agreement. If your company does decide to create this document, you should be aware of the rules governing it.[3]

According to the Nebraska Uniform Limited Liability Company Act, the operating agreement of your Nebraska LLC cannot:

• Vary an LLC’s capacity to sue or be sued in its own name.

• Vary the Nebraska state’s governing law or Nebraska revised statutes which control LLCs’ affairs and members’ and managers’ liabilities for debts, obligations, and other liabilities.

• Vary the court’s duty and power to decree a company’s dissolution.

• Eliminate the duty of loyalty, the duty of care, and the obligation of good faith and fair dealing.

• Restrict members’, managers’, and third parties’ responsibilities and rights to information without a reason.

• Vary the right to wind up an LLC’s business in some instances.

• Restrict a member’s right to maintain an action.

• Restrict rights to approve a member’s merger, conversion, or domestication.

LLC Operating Agreement Benefits

Learning that your LLC doesn’t need an operating agreement to function might dissuade you from making one. After all, it doesn’t put you in noncompliance with the state, so why bother? You can move on to other tasks necessary for your business formation.

However, not having an operating agreement might haunt you in dire situations and make you wish you devoted some of your time in the beginning to drafting this document. The following section introduces some of the benefits an operating agreement can bring your company.

• An operating agreement helps your business secure its limited liability status. This way, it protects your company assets from its members’ liability and your personal assets from the company’s affairs. That’s also one of the main reasons people opt for forming their business as an LLC rather than a sole proprietorship, so why not solidify these protections?

• A Nebraska LLC operating agreement lets you establish rules and requirements unique to your business needs and overwrite Nebraska’s state default rules. Default state rules apply to all LLCs running without an operating agreement. They can often be too broad and general for your business’s needs, especially regarding disputes, dissolution, and other internal affairs.

• Your LLC operating agreement can help you in terms of your financial possibilities. Most financial institutions in Nebraska are more open to working with organizations with an operating agreement, so you can open a business bank account faster, get more loans, etc.

Who Needs an Operating Agreement?

As mentioned, LLCs don’t need an operating agreement to do business in Nebraska. Likewise, other business entities aren’t obligated to draft one, either. However, like with LLCs, you can obtain the benefits listed above even if you’re running an organization with a different business structure.

For example, sole proprietorships have a sole member and business owner. You manage and execute all the activities yourself and keep all the profit, but state laws and default rules still apply. With an operating agreement, you can tailor them to your business and avoid unanticipated situations.

Even corporations (S corps and C corps) are advised to draft an operating agreement, called bylaws, to prevent the court from holding individual shareholders accountable for company debt. Like for LLCs, you’ll also enjoy the benefits some banks offer businesses with an operating agreement. Therefore, consider drafting this document regardless of its necessity.

Drafting Your Nebraska LLC Operating Agreement

If you’re convinced your Nebraska business needs an operating agreement, you can quickly proceed to the drafting process. Many LLC operating agreement templates are available online, but few may cater to your specific business needs. They can still serve as a good starting point. 

Registering your Nebraska LLC comes with a considerable filing fee, so you must ensure you create all your legal documents right the first time. To do so, you need to comply with the rules provided by the Nebraska Secretary of State and include all the necessary information.

In the following sections, we’ll break down the process into five steps for your convenience. Each stage will outline the information you must provide for your operating agreement to be valid and follow Nebraska state law.

Step 1: Provide Business Information

The first part of your operating agreement should include basic information about you and your company. It’s similar to making your Certificate of Organization, so you can use this document to help you with the others. It includes the following information:

• Your LLC name: The name you include should be the official name of your business, the same as the one in your Certificate of Organization. It must be unique, distinguishable from other company names in Nebraska, and conclude with a business identifier like “L.L.C.” To ensure your business name complies with all these regulations, check name availability before starting your LLC formation journey.

• Place of business: Include the primary residence of your Nebraska business, i.e., the physical address of your business in Nebraska.

• Registered agent information: A registered agent is a person within the company or an external entity that deals with the service of process notices, government correspondence, biennial reports, and other legal documents on behalf of the company. Your operating agreement must include information about their office, such as their address and P.O. box.

Step 2: List LLC Members

Whether your Nebraska company is a single-member or multi-member LLC, you must list all the members involved in the company’s decisions and operations. In addition to their names, you must also outline some additional information. This information is specific to an operating agreement and what distinguishes it from other legal documents like the Certificate of Organization and Incorporation.

The information should include:

• Each member’s membership interest, expressed in percentages

• Member contributions, i.e., their roles and responsibilities in the company

• Profits, losses, and distributions

• Member’s rights, such as how much say they have in the company’s decisions

Laying out all these aspects establishes clear roles for everyone and avoids misunderstandings and confusion.

Step 3: Decide Member-managed vs. Manager-managed

Your LLC management structure determines the layout of your operating agreement. For that reason, it’s pivotal to decide between a member-managed and a manager-managed system early on. These terms might sound similar and straightforward, but a new business owner might struggle to differentiate.

Member-managed gives the authority to all members of the company. All members are managers and have a say in the company’s day-to-day operations and affairs. The voting rights can be equal or proportional to each member’s ownership percentage. The member-managed structure is usually the default for all companies, especially single-member LLCs.

In contrast, in manager-managed companies, not all members are managers, and managers might not even be company members. Members have a more passive role, and managers can make decisions without their interference. The manager-managed structure is more suitable for large companies with many owners.

Step 4: Lay Out Administrative Operations

The section of your operating agreement describing administrative operations should be clear and detailed. It spells out company procedures and decisions in various situations pivotal for your business. They can be anything from day-to-day problems like financing to critical events like company dissolution.

While creating this section, you’ll need to ask questions such as who’ll take care of your company business account, annual reports, and allocation of profit and losses? Who will keep track of meeting scheduling and holding? Who ensures that your business plan is carried out as intended?

Remember that this section needs to be heavily customized to fit your company’s specific needs. Even if you use an online template for other parts of your operating agreement, aim to draft this section on your own or in consultation with a business attorney.

Step 5: Add and Remove LLC Members

Membership changes aren’t uncommon, especially for growing businesses. Members come and go, and you have to be ready for it. These changes shift the entire membership interest structure, voting rights, capital contributions, etc., and require new drafting of this internal document.

Thus, outlining the procedures your company will take when a new member joins your company or an old one leaves puts you and the remaining members at peace.

In addition, you should dedicate an indemnification clause in case of an agreement violation that has led to the company’s or other members’ financial losses. Otherwise, members who refuse to be removed have the right to a buyout agreement.

Create Your Operating Agreement Through a Filing Service

Now that you know what goes into creating such a vital document like the LLC operating agreement, ensure compliance and avoid mistakes by filing your operating agreement through Swyft Filings

Swyft Filings can help you make your business idea come to life regardless of where you’re in the LLC formation process. Whether you need to check your business name availability, file your LLC, or create an LLC operating agreement that complies with Nebraska state law, Swyft Filings is here for you.

FAQs

Is an LLC Operating Agreement required in Nebraska?

Nebraska state law doesn’t require LLCs operating within the state to draft an operating agreement. However, as an LLC owner, you should consider making this document to avoid any disputes regarding the company’s management and enjoy other benefits this document brings to your business.

How does an LLC Operating Agreement help protect my assets?

An operating agreement protects your personal assets by reaffirming your business as an LLC and a separate legal entity. That means that in the event of debt, your personal assets won’t be affected. An operating agreement also clearly states the ownership structure and legally prevents each member’s and the company’s assets from other members’ personal liability.

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

An operating agreement isn’t part of your company’s public records. It’s an internal document available only to the company’s members. However, entities like financial institutions, accountants, and lawyers might need access to an operating agreement for tax purposes, bookkeeping, and legal issues.

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

You must draft a whole new document if you need to edit your operating agreement for membership changes. Adding or removing members implies changes in membership interest, capital contributions, distribution of profits and losses, voting rights, etc. Of course, you don’t have to start from scratch. You only need to edit the parts that need revising and change them accordingly.

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

To start an LLC in Nebraska, apart from an operating agreement, you’ll need a distinctive business name, an Employee Identification Number (EIN), a Certificate of Organization, and business licenses and permits if your business is organized to perform a professional service.

Bibliography

1. Nebraska Legislature. “Nebraska Revised Statute 21-108.” Accessed June 29, 2023.

2. Nebraska Secretary of State. “Forms and Fee Information.” Accessed June 29, 2023.

3. Nebraska Legislature. “Nebraska Revised Statute 21-110.” Accessed June 29, 2023.