Guam LLC Operating Agreement

Why should a Guam LLC have an operating agreement?

A Guam LLC should have an operating agreement because a company cannot act for itself. In order to operate, LLCs require real humans (and other entities) to carry out company operations.

Guam Code Title 18, Chapter 15 outlines the powers and limitations of operating agreements in Guam, but does not specifically state that LLCs must have an operating agreement. However, you will need an operating agreement to maintain your LLC. Here’s why:

1. You’ll need an operating agreement to open a business bank account.

   After you file your Guam Articles of Organization, you’ll want to open a bank account for your business. Why? Your LLC only has limited liability if it can prove it’s a separate entity from its owners. Mixing personal and business spending erodes this separation, so it’s crucial to open a business bank account and keep your business finances separate. When you head to the bank, you’ll need to bring a copy of your operating agreement.

2. An operating agreement can help reinforce your limited liability status.

   To benefit from limited liability status, business owners must be able to show that their company is its own legal entity separate from its owners. One way to do this is to open a business bank account and keep spending separate. Another way is to create (and follow) an LLC operating agreement.

3. An operating agreement can help head off misunderstandings.

People aren’t always on the same page—such is life. But with an operating agreement with established rules and procedures for your business, you can prevent minor misunderstandings from flaring up into bigger issues down the line.

4. An operating agreement can override Guam’s default laws.

Without an operating agreement, your business will automatically be governed by Guam’s default LLC laws. The problem is that these statutes might not work well for your company. Creating your own operating agreement ensures that you’ll be able to run your business (within the law) in the way you see fit.

Guam Case Law

We asked our lawyers for an example of how an operating agreement can make or break your LLC. Here’s what they said.*

“Consider the case of Island Eye Center Inc., where disputes related to non-compete and non-solicitation clauses were submitted to the courts for enforceability. While the LLC did have an operating agreement, and the operating agreement was not a central tenet of discussion in the Island Eye Center case, this case serves as an excellent example of why it is important to not only formally adopt an operating agreement but also not to allow unlawful provisions to remain in any written agreement, including an operating agreement. In Guam, a contractual restraint on trade is not enforceable, therefore a reasonably prudent business owner would ensure that the written operating agreement that they intend to adopt and maintain does NOT contain any unlawful or unenforceable provisions.”

What is included in a Guam operating agreement?

An operating agreement can include anything (within the law) not already covered by Guam’s LLC Code. But a strong operating agreement is essential, and should include information about:

• Transfer of membership interest
• Voting rights and decision-making powers
• Initial contributions
• Profits, losses, and distributions
• Management
• Compensation
• Bookkeeping procedures
• Dissolution