Does my South Dakota limited liability company need an operating agreement?

Although South Dakota's LLC laws don't require a written operating agreement, you should have one.  Here's why an operating agreement is necessary:

  • It helps to make sure that courts will recognize your personal liability protection by showing that you have been careful about organizing your LLC as a legitimate business.
  • It sets out rules that govern how profits will be split up, how major business decisions will be made, and the procedures for handling the departure and addition of members.
  • It helps to alleviate misunderstandings among the owners over finances and management.
  • It allows you to create your own operating rules rather than being governed by South Dakota's LLC "default" rules, which might not be to your benefit.