What They Are: An Operating Agreement is similar to By-Laws but for an LLC. It outlines the ownership and operating procedures of the LLC.

Key Components:

• Member Contributions: Details about each member’s investment in the company.
• Profit and Loss Distribution: How profits and losses are shared among members.
• Management Structure: Whether the LLC is managed by its members or by appointed managers.
• Voting Rights and Responsibilities: How decisions are made and what voting power each member has.
• Buyout and Transfer Provisions: Rules for what happens if a member wants to leave or transfer their interest.

CPG Considerations: For a CPG startup, you might have multiple founders with different levels of investment and involvement. Your Operating Agreement should clearly spell out how decisions are made, how profits are distributed, and how disputes are resolved. This clarity can prevent conflicts as the business grows.

Involve all members in drafting the Operating Agreement to ensure everyone’s interests are protected. It’s also wise to revisit and update the agreement as your business evolves.

Getting your Articles of Incorporation, By-Laws, and Operating Agreements right from the beginning sets a strong legal foundation for your CPG brand. These documents define how your business operates, how decisions are made, and how profits are shared. They might not be the most exciting part of starting a business, but they are crucial for long-term success. Work with legal professionals to ensure these documents are thorough and tailored to your specific needs.