Create an LLC operating agreement
Select the state where the LLC was formed to create a written agreement covering ownership, management, voting, profit and loss allocations, distributions, transfers, and the other terms governing the company.
Choose the state where the LLC was formed—the state named in its articles of organization or certificate of formation.
Common questions about LLC operating agreements
What is an LLC operating agreement?
An LLC operating agreement is the company’s internal governing document. It identifies the members and establishes rules for ownership, management, voting, profits and losses, distributions, transfers, admitting or withdrawing members, dissolution, and amendments. The state formation filing creates the LLC; the operating agreement governs how the members and managers handle its internal affairs.
Is an operating agreement required in every state?
No. Most states do not require every ordinary LLC to adopt a written operating agreement. New York requires one in writing, while several other states impose different adoption or written-form rules in particular circumstances. An LLC does not become invalid merely because no agreement was adopted, but state default rules generally govern any matters the members have not addressed.
Does a single-member LLC need an operating agreement?
A single-member LLC can still benefit from a written operating agreement. It records the owner’s authority, management structure, economic terms, and rules for later changes, transfers, incapacity, or dissolution. Louisiana, Missouri, and Ohio use a written sole-member declaration in certain cases. The document also provides a clear internal record separate from the LLC’s public formation documents.
Which state should I choose?
Choose the state where the LLC was legally formed or organized—the jurisdiction named in its articles of organization or certificate of formation. Do not choose based only on a member’s residence, the company’s office, its customers, or another state where it is registered to do business. The formation state’s law ordinarily governs the LLC’s internal affairs.
What does an LLC operating agreement usually cover?
An operating agreement commonly identifies the LLC and its members and addresses ownership interests, capital contributions, management authority, voting, profits and losses, distributions, transfers, admission of new members, withdrawal or dissociation, dissolution, company records, amendments, and governing law. It should also contain signature blocks and state clearly how important decisions are approved.
Which operating-agreement rules vary by state?
State law can differ on voting power, distribution methods, amendment approval, admission of new members, dissolution thresholds, fiduciary duties, creditor remedies, and the effect of particular provisions. A few states also apply different rules depending on when the LLC was formed. The agreement should therefore be based on the law of the LLC’s formation state rather than a single nationwide template.
What is the difference between a member-managed and manager-managed LLC?
In a member-managed LLC, the members generally participate directly in managing the company. In a manager-managed LLC, management authority is assigned to one or more designated managers, who may or may not also be members. State law supplies a default structure when the governing documents are silent, so a manager-managed arrangement should be stated clearly in the operating agreement.
Can an operating agreement change the state’s default rules?
Often, but not without limits. An operating agreement can replace many statutory default rules concerning management, voting, distributions, transfers, amendments, and other internal matters. Each state also preserves rules that cannot be waived or modified freely. Limits involving fiduciary duties, good faith, company records, creditor rights, and dissolution differ among jurisdictions.
What if the members already have an oral or informal agreement?
Many states recognize oral, implied, or partly written operating agreements. A new written agreement should therefore state clearly whether it replaces any earlier understandings among the members. Without an express replacement provision, a dispute could arise over whether an earlier promise, course of conduct, email exchange, or informal arrangement remains part of the parties’ agreement.
Do all members need to sign the operating agreement?
Every member should sign so there is clear evidence that each member accepted the agreement. Although state statutes do not universally make every signature a condition of validity, a signed document provides a much stronger record of assent than an unsigned or informal arrangement. The signed agreement and any later amendments should be kept with the LLC’s company records.
Can an LLC operating agreement be signed electronically?
Yes. LLC operating agreements can be signed electronically in all 50 states and the District of Columbia. New York uses its own electronic-signature statute rather than the Uniform Electronic Transactions Act, but electronic signing remains available there. An electronic signature is not inherently weaker than a handwritten signature merely because it was applied online.
Does an operating agreement need to be notarized or witnessed?
No. No U.S. jurisdiction requires an ordinary LLC operating agreement to be notarized, witnessed, sworn to, or acknowledged. The members may sign electronically or on paper. A notary block should not be added merely because other business or property documents sometimes require notarization.
Is the operating agreement filed with the state?
No. An operating agreement is an internal company record and is not filed with the Secretary of State or equivalent agency. Forming the LLC requires a separate public filing, usually called articles of organization or a certificate of formation. Annual reports, registered-agent requirements, fees, taxes, licenses, and foreign registrations also remain separate obligations.
Can an operating agreement be amended later?
Yes. The members can amend the agreement by following the approval method stated in the agreement. Because state default thresholds vary, the document should specify whether an amendment requires unanimous consent, a majority, or another level of approval. Amendments should be written, signed by the required members, and retained with the original agreement and the LLC’s records.
What happens if the LLC does business in another state?
The operating agreement generally continues to govern the LLC’s internal affairs under the law of its formation state. Doing business elsewhere may require the LLC to register as a foreign LLC and comply with that state’s licensing, reporting, tax, employment, or other local requirements. Those obligations do not usually require a separate operating agreement for each state.
Does the operating agreement determine how the LLC is taxed?
Not by itself. The agreement can state how the members allocate profits and losses and how the company makes distributions, but federal and state tax treatment depends on separate tax rules and elections. Economic provisions should be coordinated with the LLC’s tax treatment, and the agreement should not be treated as a substitute for tax advice.
Do special types of LLC need different agreements?
They may. Series LLCs, professional or licensed-service LLCs, and statutory public benefit LLCs can be subject to additional formation filings, ownership restrictions, licensing rules, recordkeeping duties, or mandatory agreement provisions. A standard operating agreement should not suggest that it creates a protected series or satisfies professional-licensing or public-benefit requirements.