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What is the purpose of an operating agreement?

When you are dealing with oil and gas transactions in California, a great deal of time and communication will go into creating agreements and implementing protocols designed to protect both parties from being taken advantage of. One of the measures you may use to protect your assets is an operating agreement. The purpose of this negotiation is imperative to your ability to confidently and legally continue doing business with another party. 

Can you imagine how frustrating it would be to do business with another entity without a contract of some kind? Contracts allow you to clarify important terms, designate responsibilities and verify the conditions under which the contract is valid and usable.

According to the U.S. Small Business Administration, an operating agreement serves a few important purposes including your ability to have, in writing, the agreements and conditions that you and the other party decided on verbally. While a verbal agreement creates the foundation for an ongoing relationship, it is important to get that same information in writing to use as a reference if there is ever a disagreement between anyone. 

A properly formed, written and maintained operating agreement can protect your assets, your company and your own personal liability. It is also legally binding which is important if your contract is ever breached. Because of the binding nature of a secure agreement, you can be confident in your ability to get compensated for damages if your contract is breached by another party. The information in this article is intended for educational purposes only and should not be taken as legal advice. 

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