David H. Savidge Business Formation Law Blog on Lawyers.com

While you are not legally required to have an operating
agreement in Colorado, it is generally recommended, particularly when there is more than
one owner.

A limited liability company (LLC) is formed by filing
Articles of Organization with the Colorado (or other state’s) Secretary of
State. Once formed, all rights of the LLC and its owners, referred to as
“members,” will be governed by the Colorado (or your state’s) Limited Liability
Company Act.  However, the act
provides that members may determine many of their own rights by adopting an
operating agreement.  The extent to
which the rights and duties may be determined in contradiction to the
applicable act differs from state to state.

Some critical issues that an operating agreement would
address are:

Membership interests and rights:

An operating agreement should provide the respective
ownership interests of the members, which is typically based on the amount of
capital (services or money) contributed. The operating agreement should also
set forth the members’ voting and decision- making rights.  Otherwise, members’ interests will
increase and decrease depending upon the capital they contribute.  This can cause no end of trouble with
one member contributing large amounts of capital dramatically diluting other
members’ interests.

Management:

An operating agreement can state how many managers the LLC
will have. The managers can be given the authority to manage all business
affairs, or may be authorized to make only certain decisions, while leaving
extraordinary decisions to a membership vote.  This is of course a vital decision as the managers may make
decisions that can make or break your LLC.

Profits and losses:

An operating agreement can allocate profits and losses as
the members deem appropriate. The accord should also provide that members
receive sufficient distributions to cover tax liabilities associated with their
interests.

Interest transfer:

Often the most contentious and complicated issue is the
right of members to transfer their interests to family or third parties, and
what happens to members’ interests upon death or disability.  Important decisions when one considers
one’s fellow members’ “unusual” family.

As you can see, LLC members can and should adopt an
operating agreement that reflects how they intend to run the business.

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