When it comes to business entities, there are a few key documents that help define the company and how it operates. Two of the most important documents for any business entity are the articles of organization and operating agreement. Both of these documents serve different purposes, but they are both essential to the proper functioning of a business.
What are Articles of Organization (AOO)?
The articles of organization are the founding documents of a business entity. They are filed with the state in which the business is organized and they serve to officially create the company. The articles of organization must contain certain information about the business, such as the company name, address, and type of business entity. The articles of organization are also where the initial shareholders or members of the company are listed.
What is an Operating Agreement?
An operating agreement is a document that outlines the ownership and operations of a business entity. The operating agreement is not filed with the state, but it is a critical document for any business. The operating agreement should contain information about the ownership structure of the company, how the company will be managed, and what rules the shareholders or members have agreed to follow. The operating agreement is a flexible document that can be customized to fit the needs of any business.
Why do I need both an Articles of Organization and an Operating Agreement?
While the articles of organization are required to create a business entity, the operating agreement is not required by law. However, having both an articles of organization and an operating agreement is important for any business. The articles of organization provide the basic information about the company and create the company under state law. The operating agreement provides a detailed roadmap for how the company will be operated on a day-to-day basis. Without an operating agreement, the shareholders or members of the company would have to rely on state law to determine how the company should be run.
Articles of organization vs operating agreement
- Articles of organization: The articles of organization are the founding documents of a business entity. They are filed with the state in which the business is organized and they serve to officially create the company.
- Operating agreement: The operating agreement is a document that outlines the ownership and operations of a business entity. The operating agreement is not filed with the state, but it is a critical document for any business.
Both documents are important for different reasons. The articles of organization are required to create the company, while the operating agreement provides a detailed roadmap for how the company will be operated on a day-to-day basis. Without both documents, the shareholders or members of the company would have to rely on state law to determine how the company should be run.
Which should you file with the state government?
The articles of organization are filed with the state government, while the operating agreement is not. The articles of organization contain information about the company and create the company under state law. The operating agreement outlines the ownership and operations of the company and is not filed with the state.
The articles of organization are the founding documents of a business entity. They are filed with the state in which the business is organized and they serve to officially create the company. The articles of organization must contain certain information about the business, such as the company name, address, and type of business entity. The articles of organization are also where the initial shareholders or members of the company are listed.
Some final thoughts
The operating agreement is a document that outlines the ownership and operations of a business entity. The operating agreement is not filed with the state, but it is a critical document for any business. The operating agreement should contain information about the ownership structure of the company, how the company will be managed, and what rules the shareholders or members have agreed to follow. The operating agreement is a flexible document that can be customized to fit the needs of any business.
While the articles of organization are required to create a business entity, the operating agreement is not required by law. However, having both an articles of organization and an operating agreement is important for any business. The articles of organization provide the basic information about the company and create the company under state law. The operating agreement provides a detailed roadmap for how the company will be operated on a day-to-day basis. Without an operating agreement, the shareholders or members of the company would have to rely on state law to determine how the company should be run.
