Urgent: do we really need one?

My best friend and I are starting a landscaping business together. We filed the LLC in Texas last week. Our state does not require an operating agreement as part of the filing, and a lawyer quoted us $1,200 to draft one. That is a lot of money when we are just getting started.

Do we really need this? We have known each other for 15 years. We already talked about who does what and we are splitting everything 50/50. Can we just operate on a handshake and do the formal agreement later when we have more money?

Okay, message received loud and clear. I did not think about the divorce scenario or the deadlock issue. Those are real concerns. We will get the operating agreement done.

What are the key things we should make sure it covers? I want to be prepared when we go back to the lawyer so we get the most out of the $1,200.

At a minimum your operating agreement should address: (1) capital contributions — who is putting in what and what happens if the business needs more money, (2) profit and loss allocation and distribution schedules, (3) management structure and voting rights including a deadlock resolution mechanism, (4) restrictions on transfer of membership interests, (5) what happens when a member wants to leave or is expelled, (6) death or disability provisions, (7) non-compete and non-solicitation during and after membership, and (8) dissolution procedures.

Also consider a buy-sell provision. This is essentially a prenup for business partners. It sets out how a departing member’s interest is valued and who can buy it. Without this, you are back to arguing over what the business is worth if one of you wants out.

I have been running a landscaping LLC with my brother for six years. We have an operating agreement and we have referred to it three times for real disputes. Not blow-up fights, just genuine disagreements about equipment purchases and hiring. Having the process written down made each disagreement a 30-minute conversation instead of a week-long argument.

Also, if you ever want a business loan, the bank will ask for your operating agreement. Not having one looks unprofessional and makes lenders nervous.