LLCs and Operating Agreements for Home Inspection Businesses

A question that often comes up for single member LLC’s is whether or not they need an operating agreement. From the perspective of a litigator with 20-years of experience, yes, you should have a written operating agreement.  The reason is to protect you and your individual personal assets, as well as your family’s assets, from any action taken or a judgment obtained by an unsatisfied client or a regulatory body. You want to make sure that there’s a clear line of separation between you and your business in order to preserve the insulation that the LLC or other corporate structure gives.

The Purpose of Operating Agreements for Home Inspection LLCs

It’s always better to have a written agreement in which you “dot all the I’s and cross all the T’s” related to setting up the business and keeping the records and adhering to the operating agreement. Having a written agreement in place works to preserve this insulation should someone try to sue you as an individual or should somebody try and bring a claim or judgment against your business and seek to enforce that judgment against you personally.

Not every state requires a written operating agreement.  States that require a written operating agreement include:

  • California
  • New York
  • Missouri
  • Maine
  • Delaware

In no state do you have to create your operating agreement and put it on file with the state when you organize and start your LLC. Those are always meant to be kept by you. In some states, like Delaware and Arizona, the corporate records do not even display the identity of the owners of the LLC.

Regardless of state requirements, you should certainly have a written operating agreement. You should also speak to a lawyer in your state who is fully familiar with setting up a business in that state and who knows the state’s requirements for doing so. Consulting with a lawyer will help ensure that you have an operating agreement that protects you, your assets and your family from any possible liability and to set forth the terms of the operation of the LLC for the future.

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