LLC Operating Agreement Kansas | The Complete Guide

Starting an LLC may involve filing articles of organization with the state and establishing internal ground rules for how your business should operate. Establishing your credibility as a legal entity is a part of the plan.

Every Kansas LLC is encouraged, but not required, to have an operating agreement to safeguard the company’s operations, from organization to dissolution. It ensures that all LLC members understand their roles and responsibilities. This page guides you in making a Kansas operating agreement.

Kansas LLC Operating Agreement Content

An operating agreement is a legal document detailing the LLC’s organizational structure and operational procedures. Topics not restricted to a single member or multi-member LLC will be covered. While these provisions might not influence day-to-day operations, they must be included for legal reasons.

• Ownership: The operating agreement details who the members are and how ownership is divided, be it a sole proprietorship or LLC. Sole proprietorship refers to a single person with total control over a business, also known as a single-member LLC. Multi-member LLC members can have either equal or varying ownership interests.
• Management: Your LLC could be member-managed or manager-managed. The former means members can decide regarding contracts with third parties; the latter means only designated managers can do so. Using “manager-managed” instead of “hands-on” can reduce administrative work. Management’s authority is also limited in the Operating Agreement. 
• Voting: Define each owner’s voting rights and voting thresholds, such as a majority vote, supermajority vote, and unanimous consent. A variety of approvals are needed for each type of decision.
• Changes in Membership Structure: If someone leaves the company, how will roles and ownership be transferred? A member buyout and/or replacement procedure must be outlined in the LLC’s governing document.
• Contributions: All types of contributions are accepted. In order to fund their ownership interests, members will have to invest in the collective funds.
• Equity Splits: Determine equity for each member, taking into consideration things like their contributions, responsibilities, and fairness. Maintaining fairness in your equity split will help prevent future disagreements.
• Transfers: You may want to consider outlawing transfers of ownership interests without the consent of all owners. It’s always a good idea to include permitted transfers, such as first refusal, drag-along rights, tag-along rights, and estate planning transfers.
• Business Restrictions: To protect the privacy of the company, including confidentiality obligations. You may also ban the owners from owning competing businesses.
• Intellectual Property: Detail; the ownership of intellectual property created by members. Make sure all company-created intellectual property is owned by the company. You can find alternative ownership/license structures if necessary. 
• Taxation: Determine how you will be taxed and plan accordingly. Remember, however, that you must file an LLC annual report and might be required a sales tax. 
• Guaranteed Payments: Determine if any of the members should receive Guaranteed Payments, which are like a salary, particularly if your LLC is taxed as a partnership.
• Distribution & Dividends: Explain to all members how the funds will be allocated. A pass-through entity will impose tax distributions regardless of profit distributions.
• Dissolution: The LLC should be dissolved if all members elect to cease operations. It is important to identify how you will end your business in your operating agreement.

Note that the operating agreement, though not a legal requirement in most states, is vital in the operation of your LLC. Should your members have issues with the business, you can deal with it with guidance from the operating agreement.

Get Help from a Registered Agent

Developing an operating agreement could be tedious at times. Besides, since it deals with how your business operates, then it would be best to have professionals help you with it to make sure you get everything right. Getting help from registered agents would be your best bet. Here are three of our best LLC services that can provide you with registered agents to free you of worries:

Importance of an Kansas LLC Operating Agreement

Kansas doesn’t require you to create an operating agreement in the event that your LLC is registered. The majority of states require that all business entities be registered in order for them to verify the business structure. This is a step that can be skipped in Kansas when you create the LLC. The LLC will not be subject to any penalties.

But, if you want to safeguard the company and its members from misunderstandings and disputes, then you should not skip this step at all. This article will explain why LLC owners need to create an agreement.

• To safeguard the business The operating agreement defines the rules for the LLC. If members do not adhere to the rules and the operating agreement is not followed, it will regulate the operations of the LLC. The agreement could shield the LLC from the regulations of the government and give some extra benefits.
• The goal is to make the LLC credible: Investors will look at the business’ professionalism when looking at it. Since the operating agreement demonstrates that the members are concerned about their business and are determined to ensure that compliance with all laws and regulations, the LLC looks professional. So, this provides growth to the company by attracting more investors.
• To confirm the status of an LLC: LLCs, which are widely known for their restricted liability status can’t be misinterpreted by the government if they have defined it in their operating agreement. It’s easy to misinterpret an LLC that has a single member with sole proprietorship, however, an operating agreement will prove they are distinct.
• To settle conflicts: There could be future disputes concerning distributions and decisions. The operating agreement has the processes, requirements and guidelines for members of the business. The operating agreement allows members to quickly review the terms of the agreement before they begin to perform a task.
• LLC flexibility: Limited liability companies are designed to be flexible. This flexibility is provided in the operating agreement. The operating agreement grants the LLC the freedom to operate.
• To open business accounts, it’s essential for the business owner to keep an exact copy. The business will face difficulties opening a bank account in the absence of this document.

How to Edit Operating Agreement of LLC in Kansas

Operating Agreement of LLC in Kansas can be edited when all the members agree to the amendment(s). You do not need to file it with the state.

Starting a business involves a lot of planning, decision-making, and documentation. For limited liability companies (LLCs), an operating agreement is a crucial document that sets out the rules and guidelines for how the business will run. This agreement outlines each member’s respective duties, ownership percentages, and how revenue and profits will be distributed.

While the operating agreement provides a clear framework for operating an LLC, circumstances may change that require modifications or updates to the agreement. Once an LLC has been formed in Kansas, a review of the operating agreement should be carried out regularly to ensure it remains appropriate and up to date.

Editing or amending an operating agreement in Kansas can be straightforward, provided you consider these critical steps:

1. Review the original LLC state laws and statutes in Kansas. Always reference state laws and matters of corporate governance while crafting amendments to your operating agreement. Any provisions written or included must be lawful or comply with the operating agreement’s terms.

2. Confirm terms of the existing operating agreement. Be sure to review and determine the agreement’s original signatories and confirm that these are still in effect, as well as any amendments previously made to the agreement. It is not necessary to rewrite the entire document, but any concerns should be properly addressed when creating an amendment, i.e., adding, modifying, or expunging.

3. Draft the changes in writing. Any changes, additions or deletions to the operating agreement should be recorded in writing with proper substance and organization. Well-organized and defined changes will ensure clarity and mitigate disputes between members hence supporting clarity and simplification over time.

4. Seek input from legal and financial professionals. The process may benefit from utilizing external consultants to gain a fresh perspective on your current status as an entity and evaluate changes based on compliance with actual class legislation and gauging the actual impact after the changes have been implemented.

5. Obtain your document’s change and amendment must be annotated legislatively. Modifications or general changes should be crystal clear in documenting the comprehensive amendment concerning the altered operating agreement. Note what must be deleted with a [strike] tag and what text must be replaced with an italicized and underlined notation. The actual date of execution, date of approval, and signatories involved must appear as required to alert the board of resolution to depart from the applicable entities largely.

In conclusion, as a crucial constitutional document for any LLC, operating agreements should be diligently and periodically reviewed in their entirety to ensure it complies with current changes relevant to governance and regulations set by the State of Kansas. Tailored amendments to improve existing operating agreements, not individual conscience based measures for opinionated interests that may conflict with the purpose of the agreement in place, that satisfy statutory compliance to modify the concerns of members and codify legal binding performance laid out by both governing documents and the Open Meetings Act are indispensable for a productive functioning LLC that is legally viable, assuring longevity and growth prospects over time.

F.A.Qs

In Conclusion

The operating agreement is an important document for your Kansas LLC. However, it is not mandatory to file in many states. It is strongly recommended to file the operating agreement even if it is not required in your state. Get a professional LLC service to file your operating agreement properly.