What to Include in a Solid Operating Agreement
March 20, 2026
Starting a business is a whirlwind of excitement, late nights, and big dreams. We know that in these early stages, the last thing you want to think about is what might go wrong or how a disagreement could stall your progress.
It’s natural to want to focus on your products, your brand, and your customers. However, taking a moment to protect that dream is the kindest thing you can do for your future self and your business partners.
Whether you’re a solo founder or a group of partners, having a clear operating agreement is the best way to honor the commitment you’re making today. At Lewis & Van Sickle, LLC, we assist clients in Green Bay, Wisconsin, as well as Oconto, Shawano, Kewaunee, and Sturgeon Bay in creating documents that provide peace of mind. Reach out to us to start building your business on solid ground.
1. Define Ownership Interests and Capital Contributions
One of the first things your operating agreement should clearly outline is who owns what and what everyone brought to the table. This isn't just about money; it’s about acknowledging the various ways partners contribute, whether through cash, property, or specialized services.
If you don't write this down, you might find yourself in a bind later if memories fade or expectations change regarding who holds the most "weight" in the company. The primary items that should be outlined in the agreement include the following:
Initial capital contributions: This section should list exactly what each member contributed to the LLC at the start, whether it's a $10,000 check or the deed to a warehouse.
Percentage of ownership: Explicitly state the ownership percentage for each member, which often aligns with their contribution, but doesn't necessarily have to.
Future funding needs: Decide now how the company will handle additional funding down the road, including whether members are required to chip in or if you'll seek outside investors.
Capital accounts: Set up a system to track each member's equity over time to help keep the books clean and the partners happy.
By being specific about these financial stakes, you’re preventing the "he-said, she-said" scenarios that often plague growing businesses. It’s about transparency and making sure everyone feels their investment is recognized and protected. Once these numbers are set, you can focus on the day-to-day operations, knowing the "who owns what" question is settled.
2. Outline Profit Distributions and Tax Preferences
You’re in business to be successful, and part of that success involves making money. A solid operating agreement dictates how and when those profits are handed out to your members. It also addresses how losses are shared, which is just as important for tax purposes. If you don't have these rules in writing, state laws might step in and distribute your funds in a way you didn't intend. The rules that you should have in writing include the following:
Distributive shares: This part of the document should explain how profits and losses are allocated to each member, typically in proportion to their ownership percentage.
Timing of distributions: You can decide whether the company will pay out profits monthly, quarterly, or annually, or whether managers have the discretion to retain cash in the business for growth.
Tax classification: While LLCs are often "pass-through" entities, you have choices in how the IRS treats you, and your agreement should reflect those preferences.
Liquidation preference: In the event the business closes, this section determines the order in which remaining assets are paid out to members.
Money is often the biggest sticking point in any partnership, so having a pre-approved plan is vital. It removes the guesswork and provides a predictable path for everyone’s personal financial planning. When your financial expectations are set, you can work together toward those profit goals with a shared vision.
3. Plan for Membership Changes and Dissolution
Life happens. People move, retire, or sometimes find they just aren't a good fit for the business anymore. Your operating agreement should act as a "business pre-nuptial" that explains what happens when a member wants to leave or if a new person wants to join. Thinking about the end (or a change) while you’re just beginning might feel strange, but it’s the best way to protect the entity you’re working so hard to build. The things you should include in your business pre-nuptial are as follows:
Buy-sell provisions: These rules outline how a member’s interest can be bought out upon leaving, death, or a legal event such as a divorce or bankruptcy.
Right of first refusal: You might want to require that any member wishing to sell their share must first offer it to the existing members before going to an outsider.
Admission of new members: Setting a process for bringing in new blood makes sure that everyone is comfortable with who they’re getting into business with.
Dissolution procedures: If the time comes to close the doors for good, having a step-by-step guide for paying off debts and distributing what’s left saves a lot of headaches.
An experienced business law attorney can help you think through these "what-if" scenarios that might not be on your radar yet. By planning for transitions now, you can make sure your business continues to thrive even when the faces behind it change. It provides a graceful exit for those who need it and a clear path forward for those who stay.
Contact Us to Protect Your Vision With a Comprehensive Operating Agreement
At Lewis & Van Sickle, LLC, we're committed to supporting the entrepreneurs and families who make our communities great. We truly understand that your business is more than just a legal entity; it’s a reflection of your hard work and your hopes for the future. Drafting an operating agreement isn't about creating red tape; it's about creating a safe space where your business can flourish without the threat of internal disputes.
We’ve seen firsthand how a little bit of foresight can save years of stress, and we’re honored to help our neighbors secure their livelihoods. Don't leave your company's future to chance or generic templates that don't capture your specific needs.
With offices in Green Bay and Pulaski, Wisconsin, our firm serves clients throughout Oconto, Shawano, Kewaunee, and Sturgeon Bay. Reach out to us today to schedule a consultation and get your business off to the right start. Call now.