What are the circumstances appropriate for redrafting your documents?
In this episode of Coffee with Carl, attorney Carl Zoellner guides you through the process of document drafting.
So, you’ve got some entities in place.
You’re not really sure how they work, if they work, or what exactly they do, but you have them in place and are all paid for in advance.
But inevitably, something happens… and it falls on your mind, am I protected?
With that, I want to talk a little bit about when you should consider doing document drafting or redrafting your bylaws or your operating agreements.
This comes up most frequently with new clients who may have set up entities prior to coming to Anderson, and after having gone through some of our education courses they’re concerned that their entity documents are putting them at risk.
So, the quick answer is your document should be redrafted. If you’re concerned that they’re putting you at risk, they’re likely deficient.
If we’re looking at online operating agreements, without calling out any specific names, they usually use a substandard operating agreement, which misses a lot of the different high points you need to address in an operating agreement.
Think about it this way, your operating agreement or your bylaws is essentially a list of instructions that tell a third party how different conflicts or different issues should be decided.
So, in the case where you’re doing joint ventures or working with other parties or making contracts with people, you should really have a great operating agreement in place for an LLC or great bylaws in place for your corporation.
Unfortunately with a lot of these online companies, you would get the same operating agreements, regardless of the state. Whether in Washington or in Florida– it’d be a default catch all system.
But, if it’s a good operating agreement, it’s fine. If it’s a mediocre, substandard operating agreement, you’re at risk.
If you’re going to have an operating agreement or bylaws, you want to make sure you have the maximum amount of protection, not just some mediocre level. Different states have different asset protection laws, you may actually be stepping on your own protections by having a subpar operating agreement or bylaws.
Back to our original topic, when is document drafting appropriate for your bylaws or operating agreement? When there’s reason to believe that those are substandard or sort of run of the mill.
Most of our clients will come in and have us do that for them, especially if it’s somebody who’s interested in our unlimited LLCs for life package, which we include that document drafting for those existing LLCs or corporations out there too, that way everything’s under the same umbrella.
If you don’t know if it needs to be done, and if you’re a platinum client, you’re more than welcome to submit your operating agreement or bylaws that you had prior to coming to Anderson, and we can give them an overview and let you know if they meet the standard or not.
As always, take advantage of our free educational content and every other Tuesday we have Toby’s Tax Tuesday, a great educational series. Our Structure Implementation Series answers your questions about how to structure your business entities to protect you and your assets. One of my favorites as well is our Infinity Investing Workshop.
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- Join our next Tax & Asset Protection event to learn more advanced tax minimization & entity structuring strategies
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Got an idea for a future Coffee with Carl? Send it to Carl at firstname.lastname@example.org.
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