LLC Operating Agreement Must-Haves for Colorado Businesses

Colorado entrepreneurs have a lot to think about when launching a new business. For small businesses that have selected to operate as a Limited Liability Company (LLC), it’s wise to put an LLC operating agreement in place to protect your company from contentious legal disputes in the future. As you focus on getting your business up and running, take some time to draft a clear and effective LLC operating agreement that will support your new venture, come what may. Here are some essential elements to include in an LLC operating agreement to help you get started.

Member Financial Interest and Corporate Governance

Your LLC operating agreement should specify each member’s percentage of ownership. It should also clarify the rights, responsibilities, and fiduciary duties of each member based on their respective membership interests and determine how members will be paid. Additionally, if the LLC is to be manager-managed (as opposed to member-managed), the LLC agreement should consider how a board or board of managers will be formed, the manager selection process, and the specific powers of these managing members.

Logistical Considerations

While you may assume that you’ll figure out how to resolve a dispute when it arises, neglecting to include specific instructions regarding dispute resolution protocols in an LLC operating agreement can lead to bitter and costly litigation. Your LLC operating agreement should address how disputes should be handled (i.e., through mediation, arbitration, or litigation). An operating agreement that provides clear instructions about how books and records should be created, managed, and stored (and by whom) can make future disputes proceed more smoothly, as all relevant documents will be organized and stored according to the terms put forth in the agreement.

Departing Members and Dissolution

As you start a new business, it may feel counterintuitive to talk about its eventual demise. However, it’s essential to include such provisions in your LLC operating agreement so that all parties have a clear understanding of what to do in the event of the LLC’s dissolution. You’ll also want to address how the company will handle a member’s departure—either voluntarily or involuntarily. Remember, it’s always a good idea to enlist the guidance of a knowledgeable Colorado business attorney as you draft your LLC operating agreement so that you, your partners, and your business can move forward with confidence.


For customized legal guidance regarding your Colorado business, call Judex Law LLC today at (303) 523-4022.

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