Is a Business Plan Needed for an LLC?

By Larissa Bodniowycz, J.D.

Is a Business Plan Needed for an LLC?

By Larissa Bodniowycz, J.D.

A business plan describes your business's goals and details a strategy for achieving them. While business plans are not required by law, they can keep your business organized, allow you to strategize for the future, and attract potential investors.

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Reasons to Create a Business Plan

Even though a business plan is not required by law, an LLC should still have one, as it is a key planning and organizational tool. Defining your business's objectives and high-level strategies helps you achieve business goals. It also serves as an objective checkpoint to assess your LLC's progress. If you haven't met the goals you set forth in your business plan, it signals that you need to reassess the business and whether your current strategies work.

A business plan is also a key tool for attracting financing. A business plan makes it easy to communicate to potential financial backers that your business shows signs of growth and that your future expectations are well thought out, supported, and realistic.

Your business plan can also address potential problems and what you can do if they arise. When or if that time comes, you can be more prepared to handle problems and more confident about your decisions.

Topics to Cover in a Business Plan

There is no single format for a business plan. The length, level of detail, and degree of formality vary depending on the business's type, size, and goals. However, most business plans include an executive summary, descriptions of the products or services offered, a market analysis, a business operations plan, the management and organizational structure, a marketing strategy, a financial plan, and financial predictions.

If there are multiple people involved in starting your business, it often makes sense to divide responsibility for drafting the business plan. For example, the person with the most knowledge about finance and accounting creates the financial sections, while the person with the most knowledge about marketing writes the marketing analysis and strategy sections.

You do not have to start your business plan from scratch. Templates are available online, in word-processing software programs, and in books. You do not have to follow the templates exactly, but they usually serve as a good jumping-off point.

Business Plan vs. Operating Agreement

Many states do require an LLC to have an operating agreement. An operating agreement is different from a business plan; an operating agreement is an official contract that binds the LLC members to its terms. Sections of an operating agreement include ownership interests of the members, the role and duties of the members and managers, distribution of the business's profits and losses among members, the process for ownership changes, and how to dissolve the LLC.

An operating agreement has a narrower focus than a business plan. It focuses on the roles of the members, their capital contribution, when they hold meetings and admit new members, and how the business makes decisions. A business plan covers all aspects of the business and acts as a set of guidelines, not a binding agreement. It may address members and management, but it also lays out the big picture idea and has an audience outside its internal members.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.