Operating agreements supplant statutory default rights and duties for an LLC and its members. An operating agreement provides more control over the terms of their operations that would otherwise be governed by default provisions, article, and contracts. An operating agreement could forgo this uncertainty by unambiguously setting forth the rights and duties of all present and future parties.
In general, LLCs and corporations limit liability by shielding the personal assets of owners if creditors sue the entity but limited liability isn’t as simple as checking a box. If creditors are able to prove that the LLC or corporation is a sham (meaning the owners don’t comply with the legal formalities), the corporate veil may be pierced, and the owners’ personal assets are again at stake. An operating agreement protects the limitations on liability by demonstrating that the company and owners are operating in legal accordance and as they had planned.