LLC Operating Agreement

It is different from the formation document filed with the state. The operating agreement governs relationships inside the LLC.

What can an operating agreement cover?

Depending on the LLC, an agreement may address:

• • member ownership interests
• • capital contributions
• • voting rights
• • member-managed vs. manager-managed authority
• • distributions
• • admission of new members
• • transfers of ownership
• • departures, disability, or death of a member
• • recordkeeping
• • dispute procedures
• • dissolution

This is not an exhaustive list, and the appropriate provisions depend on the company.

Does every LLC need one?

State law varies on whether an operating agreement is expressly required and what form it can take.

Even where a written agreement is not mandatory, documenting how the company will operate can be useful—especially for multi-member LLCs.

A generic online template may not address ownership arrangements, state law, tax elections, or industry-specific issues. Consider legal counsel when the stakes or ownership structure warrant it.

Single-member operating agreements

A single-member LLC does not have co-owners to negotiate with, but an operating agreement can still document the company's governance and the owner's authority.

Read Single-Member LLC

Multi-member operating agreements

For a multi-member LLC, the agreement can be particularly important because it establishes expectations before disagreements arise.

Questions worth addressing include:

• • Who can bind the company?
• • Which decisions require a vote?
• • What happens if members disagree?
• • Can a member sell an interest?
• • How are distributions determined?
• • What happens when an owner leaves?

Operating agreement vs. Articles of Organization

Articles of Organization: public-facing state formation filing.

Operating agreement: internal governance document.

Read LLC Articles of Organization

Keep it current

Ownership, management, addresses, tax treatment, and business operations can change. Review the agreement when significant changes occur and follow any amendment procedure it requires.