An operating agreement is an agreement among the owners (called “members”) of an LLC, defining their ownership, management and other determinations. It would generally be in writing.
All sizes of companies need an operating agreement. From the smallest 1-member LLC to a large multi-member LLC, an operating agreement is a critically important document. While detail and complexity will vary dramatically between a small, simple company and a large company, the core components of an operating agreement are important for any type of business. An LLC operating agreement provides legally-binding details of how a company is operated, who owns it, how decisions are made, how additional owners are added (or removed), how profits are to be shared, how ownership interests can (or cannot) be transferred, and so on. Missouri law requires each LLC to have an operating agreement and while it is possible to maintain a “oral” operating agreement, such are inherently problematic and generally ill-advised. In many instances, a thorough written operating agreement can be simple and straightforward.
When you create a trust, you typically name yourself (or perhaps you and your spouse) as the trustee(s) of your trust. The trustee manages the trust assets and makes determinations about investments and distributions. Of course, when you pass away, you will no longer be the trustee of your trust. So, who manages trust assets? Who makes determination regarding investments and distributions? A well-drafted trust agreement will provide detail and direction on these fronts, but someone must still be in charge (the trustee). When determining who to nominate for this central role, the following characteristics are important to consider:
Financial Competence. Skill at managing trust assets, keeping accurate records and properly handling finances will go a long way toward smooth and proper trust administration.
Strong Communication. The trustee will be interacting with beneficiaries. A strong ability to be clear, friendly and accurate is important.
Local. All things the same, a trustee based locally is generally better than one located out of town. Of course, this can vary depending on individual circumstances.
Familiarity. Familiarity with your goals and wishes can be helpful in situations where the trustee has some discretion in distributions.
The selection of the right trustee can make a major difference in the smooth and competent administration of a trust. While there is no perfect formula for selecting the right person (or trust company), ample consideration given to these qualities can be a good starting point.