Wyoming LLC Operating Agreement: Drafting Checklist

Forming an LLC correctly in Wyoming requires several key steps, including creating an operating agreement. This document spells out how the business will operate and who owns it. It’s optional by law in Wyoming, but most businesses are much better off setting one up early on. Here’s a guide to help you create a Wyoming LLC operating agreement.

Key Takeaways

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

• While not mandatory in Wyoming, having an operating agreement is highly beneficial for the smooth operation of your small business.

• You should draft an operating agreement as early as possible in the business formation.

What Is an LLC Operating Agreement?

An operating agreement lays out the rules and regulations for a company, from ownership to each partner’s responsibilities, so that everyone involved is on the same page. This agreement will allow smoother operations and prevent many potential disagreements or confusion.

The LLC operating agreement is also a guide for making sound company decisions, managing finances, and resolving disputes. It outlines the roles and responsibilities of each member, thus promoting clarity and protecting the business.

The core players in this agreement are the individuals or entities with a stake in the LLC. These owners invest their resources, share successes and losses, and ultimately control business operations. This agreement outlines the rights and responsibilities of all parties involved.

State Requirements

Although it isn’t a legal requirement in Wyoming, the Secretary of State[1] highly recommends having an LLC operating agreement. The Wyoming Limited Liability Company Act accepts such agreements and could supersede standard regulations if all members sign off.

While the State of Wyoming[2] does not require an LLC to have an operating agreement, every business can benefit. A well-defined document brings clarity and certainty to a business. It explains the roles of everyone involved, specifying who is responsible for what, and, crucially, sets out a process for settling possible future disputes.

Of course, without an operating agreement, you’d have to rely on the state’s default rules which might not be the most suitable one for your company.

LLC Operating Agreement Benefits

The advantages of having an LLC operating agreement[3] are numerous and can considerably help a business. It solidifies your limited liability standing and guides how you manage income tax issues and other financial matters. It can also help keep your personal liabilities separate from the company’s obligations. Let’s thoroughly examine this agreement’s main benefits:

• Helps to establish your LLC’s legitimacy. It clarifies that a business is a separate entity, not an extension of its owners. If something goes wrong with your business, you don’t have to worry about putting your personal assets at risk. It’s the best way to protect the limited liability status.

• Clarifies a business purpose. It declares the purpose of the business, its objectives, and the methods to reach them. The document can benefit you in many ways, such as attracting investors, obtaining financing, and guiding decisions.

• Sets the boundaries and expectations for how you’ll manage the financial aspects of your business. It’s necessary to ensure everyone understands what percentage of profits they will make, how taxes will be considered, and most importantly, how you will settle any financial disagreements.

Who Needs an Operating Agreement?

Any business registered as an LLC in Wyoming, regardless of its size or type of formation, can create (and needs) an operating agreement. That includes single-member LLCs, multi-member LLCs, and even businesses operating as a sole proprietorship or an S-Corp.

An operating agreement is helpful to more than just large or complex businesses. Even for a sole proprietor or a small business, an operating agreement can provide clarity and structure without involving many signatures on the paper. It can help you to define business goals, manage finances, and protect personal assets.

The state of Wyoming permits these agreements to override the default state laws within certain boundaries. Therefore, you can customize the operating agreement to suit the specific business.

Even if your business is registered as an S-Corp, it would still benefit from an operating agreement. The agreement can define the roles and responsibilities of all shareholders, directors, and officers and provide a framework for business management.

Drafting Your Wyoming LLC Operating Agreement

Creating an LLC operating agreement needs accurate information regarding your business. You can collect this information during the LLC formation or after. You can write the agreement from scratch or find an LLC operating agreement template as a guide. Here is a checklist to ensure all elements are in place.

Step 1: Provide Business Information

State the official LLC name, geographical business location, industry type, and EIN. Also, give the name and address of your registered agent — this should all correspond with the information provided in your Articles of Organization.

Choosing a business name for your LLC is paramount for its identity. It must stand out and not be mistaken for the name of any other business. Then, you should decide where your business will be based — this location can either be one physical address or multiple if you have other branches. Make sure to keep the address of your primary office in mind.

The type of activity your business is engaged in is the industry. The industry could range from retail to tech to production. The registered agent oversees any legal notifications related to your LLC, which can be a member or an external service.

Step 2: List LLC Members

List all the LLC members, along with their roles and responsibilities. The information you’ll need includes ownership interest in the business, capital contributions, and voting rights.

Each person’s stake in the LLC generally reflects their capital contribution to the business. The contribution can be money, physical assets, or labor. Everyone should understand their duties and rights. This could include the authority to make decisions, who handles operations, and any obligations to the LLC.

Voting rights determine who gets a say in making decisions in the LLC. For the most part, voting power is tied to a member’s equity interest. Feel free to craft something that works best for your business.

Step 3: Decide Member-managed vs Manager-managed

The next step is to decide whether your LLC will be member-managed or manager-managed. Such a decision will determine who has the authority to decide on behalf of the company and who will be responsible for the business’s day-to-day operations.

All members can make decisions and manage the business in a member-managed LLC. This management type is common in small LLCs where there are a limited number of members.

In a manager-managed LLC, the members appoint one or more managers to oversee the business. The managers have the authority to make decisions and manage the day-to-day business. Meanwhile, the members refrain from participating in these activities. This type of management system is common in larger LLCs, where many members prefer being passive investors.

Step 4: Lay Out Administrative Operations

You’ll need to describe the procedures to handle various situations within the business entity. They include tax clarifications, profit and loss allocations, annual reports, member meetings, and voting.

Tax clarifications can prevent confusion or disputes in the future. They could include defining exactly how you’ll pay taxes, how to fill out tax forms, and each member’s responsibilities regarding taxation.

Profit and loss allocations affect everyone’s bottom line. Generally, it follows each member’s ownership stake in the company, but there is some wiggle room to customize it according to what best works for your business.

Wyoming state law requires businesses to file annual reports. This document shows a limited liability company’s operations and progress over the past year. You should provide it to the Wyoming Secretary of State.

Occasional member meetings are necessary for decision-making and communication within the LLC. The operating agreement should clearly outline when and how these gatherings occur and what constitutes a quorum of voting members.

The LLC needs to be clear on voting procedures. That includes setting out the rules for counting votes, deciding what constitutes a majority, and determining how to address disagreements.

Step 5: Add and Remove LLC Members

Include the processes for adding and removing members into the agreement. They should outline how to transfer a membership interest and under what circumstances you can release a member from the organization.

Introducing fresh faces to the LLC could bring much-needed funds and skill sets. It also could alter the company’s makeup, so drawing up a plan for onboarding new members should have its place in the operating agreement.

The operating agreement outlines the procedure for removing a member from an LLC, which could involve anything from a vote to the member’s interest buyout to dissolving the organization. However, you should keep the sensitivity of this process in mind — you should never take this lightly.

Create Your Operating Agreement Through a Filing Service

Now that you understand what goes into drafting an LLC operating agreement consider using a filing service to take the burden off your shoulders. Using a filing service simplifies everything and prevents mistakes. Also, this way, you don’t need to worry about forgetting any paperwork.

At Swyft Filings, our LLC operating agreement service can create a fully compliant document so you don’t have to worry about not meeting Wyoming’s legal requirements while conducting business.

Give your business the best possible start. Get your LLC set up with Swyft Filings, pay a small state filing fee, and select our LLC operating agreement as an add-on when you check out. That way, we can guarantee that all your essential paperwork is suitable from the beginning.

FAQs

Is an LLC Operating Agreement required in Wyoming?

It’s not a legal requirement, but having one is still smart. It gives you and your business greater clarity regarding operations while providing the power to override state laws that don’t suit you.

How does an LLC Operating Agreement help protect my assets?

An LLC operating agreement protects your assets by separating your personal assets from business ones. In this way, should anything ever go wrong for your limited liability company, your personal finances will remain untouched.

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

All members of the company should have access to the operating agreement. Providing a copy to your attorney or accountant is also a good idea.

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

If there is a shift in membership, you will need to update the operating agreement. All parties must agree on the changes, and every amendment requires documentation and get attached to the original document.

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

Apart from the operating agreement, you should look into getting Articles of Organization, an Employer Identification Number (EIN) application, and other pertinent tax documents. The exact required paperwork will depend on the type of business you are operating.

Bibliography

1. Wyoming Secretary of State. “Wyoming Limited Liability Company Act and Close LLC Supplement.” Accessed June 12, 2023.

2. Wyoming Secretary of State. “Business & UCC Center.” Accessed June 12, 2023.

3. IRS. “Limited Liability Company.” Accessed June 12, 2023.