An LLC is a type of U.S. business entity that is easy to form and simple to manage; more importantly, it limits the liability of owners. To take full advantage of having an LLC, the founders should go one step further and write an operating agreement during the startup process.

The operating agreement is a document which spells out the terms of a limited liability company (LLC) according to the members. It sets forth the path for the business to follow and brings in more clarity in operations and management. An LLC operating agreement is a 10- to 20-page contract document which sets up guidelines and rules for an LLC.

It is always considered wise to draft an operating agreement, as it protects the status of a company, comes in handy in times of misunderstandings, and helps in carrying out the business according to the rules set by you.