Operating agreement

Definition

The document setting who owns, decides, and is paid inside your entity.

Why It Matters

Most buyers form an LLC to make the purchase and then treat this as a filing fee, which is where partner disputes are born. It names the members and their percentages, who can sign a loan or sell an asset, how a deadlock breaks, and what happens when one of you wants out or simply stops working. Your lender will read it and your investors will negotiate it, and if you ever fall out with a partner it is the only document that decides anything.

In numbers: Two partners splitting 60/40 still have to say whether a decision needs a majority or both signatures, because at 60% one of them can otherwise sell the business the other spent 5 years running.