Free LLC Operating Agreement Template, Sample & FAQs (2024)

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About LLC Operating Agreements

Learn how to define and document how your business will be run

• How To Write an LLC Operating Agreement

  An LLC Operating Agreement may be used to outline the terms of a new LLC. The Operating Agreement typically includes a list of all Members to the agreement as well as their contribution amounts and ownership interest percentages. The Operating Agreement also establishes the general operating rules of the LLC, including how voting will work, buy-out provisions, and the management structure.

  Following are key provisions that can be found in an LLC Operating Agreement, along with information and descriptions for each clause:

  Company Name

  This should be the name you used when you registered your company, including "Limited Liability Company," "LLC," or "L.L.C." at the end.

  Company Purpose

  Most states require a general Statement of Purpose for LLCs being formed in their state. The statement can be very broad, such as "manufacturing" or "email marketing." Generally, though, it is best to be more specific in order to avoid any misunderstandings or legal complications later.

  Company Address

  The LLC's Primary Business Address is the primary location from where the LLC operates. Some states (Alaska, Arizona, Louisiana, Maryland, New Hampshire, and South Dakota) require that LLCs registered to their state have their primary business address within the state's borders. Other states do not require that the office be located in their state, but require a Registered Agent or Registered Office within the state for service of process or other notifications.

  If you don't have a physical business address, use the address of one of the LLC's Members. Do not use a P.O. Box.

  Start Date

  When will your Operating Agreement take effect? This can be in the future or the past, but should be on or after the date when your LLC's official paperwork is accepted and approved by the state.

  Company Duration

  Will the LLC operate indefinitely, or will it end on a specific date? You can choose for the LLC to continue until the Members dissolve it at a later date, or you can set a limited lifetime.

  Registered Agent Details

  Most states require that LLCs and other companies doing business in their borders maintain either a registered office or a registered agent for the service of process or other notices. All states other than Pennsylvania require both, although some states, such as New York, allow their state's Secretary of State to serve as the Registered Agent. Each of the 50 states may have their own particular definitions of these terms, but they mostly conform to the definitions below:

  A registered agent is a person who is an agent for service of process on the limited liability company, who is appointed by the limited liability company, and whose address is the registered office of the limited liability company. All states other than Pennsylvania, New York, and Connecticut require that registered agents be residents of their state and that they use an in-state registered address.

  A registered office is the office maintained by the limited liability company in a state at which any process, notice, or demand required or permitted by law may be served upon the registered agent of the limited liability company. P.O. Boxes are not permitted except for very limited circ*mstances in Alaska, Hawaii, Indiana, Louisiana, Maine, Minnesota, Missouri, Nevada, New Hampshire, North Dakota, Tennessee, Utah, Virginia, Washington, and Wisconsin.

  Partnership Representative

  The partnership representative is the liaison between the LLC and the IRS in the event of an audit. The representative does not have to be a partner or officer in the LLC, but they must be a member with a substantial presence in the United States. The representative must be designated in the annual tax return. If one is not named, the IRS may select any member. The partnership and its partners are bound by actions taken by the partnership representative.

  Members

  Members are the owners of the LLC and in most states they can be individuals, corporations, other LLCs or foreign entities, although these are often the founding individuals and contributors. Few states limit the number of members from single-member LLCs to having a high number of members.

  As your company grows and evolves, you can add or remove members through a Board Resolution and then by filing an Articles of Amendment with the state you are registered in.

  Member Contributions

  Typically, when an LLC is formed, a Member makes a contribution to the LLC in the form of capital investment or funding. Members may also make "non-cash contributions," such as contributing assets (shares or other non-cash financial assets), real estate, personal property (equipment, supplies, decor, etc.), intellectual property, services, or just old fashioned “sweat equity” (time and effort). Members may even “contribute” the promise of future funding, services, or non-cash contributions.

  Regardless of what is being contributed, you will need to list all the Member's contributions to the LLC (whether they are cash contributions, non-cash contributions, or both) and place a monetary value on all non-cash contributions, including the appraised value of any real property.

  Ownership

  Ownership is typically determined by the amount of capital contributions given to the LLC upon startup. You should use this section of the Agreement to define each Member's percentage of ownership of the total LLC based on their contribution amount. The total of all percentages should equal 100%.

  You can calculate each Member's percentage ownership by multiplying their contribution times 100 and dividing that number by the total contributions of all Members.

  Costs and profit shares will be determined by the percentage of ownership. Although some states allow you to assign cost and profit shares that are different from the percent ownership, the Internal Revenue Service must approve of the change. If you wish to assign cost and profit shares different from the percent ownership, it is suggested that you consult a lawyer or accountant familiar with LLC and tax laws for your state.

  LLC Management, Rights and Responsibilities of Parties

  This section specifies who will manage the LLC on a day-to-day basis: the members or managers. If the LLC will be manager-managed, you can appoint these managers in this section. You can also use this section to specify who will carry out which duties.

  • Member-Managed LLCs: An LLC may be managed by its Members or by a set of Managers, who may or may not also be Members. If an LLC is Member-Managed, all of the LLC's Members have a managerial role in the company, and can vote on matters of governance. This may limit the ability of Members to act as silent partners or passive investors in the LLC.
  • Manager-Managed LLCs: If an LLC is Manager-Managed, then the day-to-day operations of the LLC are controlled by appointed Managers (who may or may not be Members). In a Manager-Managed LLC, the Members will still retain some power, such as appointing Managers or dissolving the company.

  In a Member-Managed LLC, each Member may have the authority to bind the LLC, while in a Manager-Managed LLC, that authority is limited to the Managers or a designated officer (if the LLC has elected to appoint officers).

  Manager and Officer Details, if Applicable

  You may want your LLC to have officers, such as a President, Secretary or Treasurer. Assigning officers can be helpful in delegating authority and running the LLC. Your Operating Agreement will not list the names of the officers, only establish the LLC's authority to name officers.

  While not legally required, assigning roles to the Members or employees as Officers of the LLC may be helpful in outlining the scope of their authority, demonstrating appropriate separation of assets between the Members and the Company, and conducting the business of the Company. Traditionally included Officers are Chairman, President, Vice President, Secretary, and Treasurer.

  Tax Treatment Election

  An LLC may elect to be taxed as a corporation instead of a partnership or sole partnership. If an LLC wishes to be taxed as a corporation, it must first meet certain criteria and must file additional paperwork with the IRS in order to be eligible.

  An LLC can be taxed by the Internal Revenue Service as either a pass-through entity (taxed like a partnership) or as a C-corporation (taxed like a corporation). The default is to tax the LLC like a partnership, but the LLC can easily change its tax status to C-corporation by filing paperwork with the IRS. This might alter the amount of tax that the LLC will pay to the federal government each tax year. For more information, consult the IRS website.

  Fiscal Year

  Your taxable income is based on a “tax year,” a year period of your choosing. This means that a tax year can be a regular calendar year (January through December) or a fiscal year of 12 consecutive months, beginning on the first day of the whichever month you choose and ending on the last day of the 12 consecutive months later.

  Both fiscal and calendar tax years cover the same amount of time, so choose a tax year based on what is most convenient for your business.

  Profit Distribution (Also Known As “Profit Allocation”)

  How will the LLC distribute its profits to Members and how often will the profits be distributed? The LLC will distribute money from the company's total profits to the company's Members in a process called a "profit allocation." Typically, company profits are provided to the Members from the company in the form of a check at routine intervals, much like a salary. The amount paid to each member will change according to the company's profits for that period.

  Generally, the division is based on the amount each person has invested in the company, but you can choose a different proportion as desired for your unique circ*mstances. You can specify how many times per year the profit allocation will be distributed, often monthly, quarterly, bi-annually or annually. Later down the road, if you want to change the profit distribution percentages and frequency, you can do this any time by a Member vote.

  Voting procedures

  How will decisions be made by the Members? Typically, decisions are made through a majority vote of the business’ members. How those votes are distributed is determined by what you designate in your Operating Agreement. Here are two common ways of dividing voting power among members:

  • All decisions require a majority vote based on percent of ownership. In this scenario, if any Members have a majority ownership, they will be able to make the decisions without the input of the other Members. This style of voting allows members with the greatest investment to have more control over the direction of the company.
  • All Members will have an equal vote, regardless of percent of ownership. In this scenario, members with smaller ownership stakes have equal voting power to a member with a majority ownership. This could be used as a balancing mechanism to ensure decisions are not made without the input of the other Members.

  Additionally, some decisions are so big, they call for a unanimous vote (the agreement of all members) rather than a majority vote (more than half). A vote to dissolve the company would be a common example of when you may want to leverage a unanimous vote of members, rather than a simple majority.

  Member Buyouts

  What happens if a member quits, is found incompetent, or dies? When a Member withdraws from the company, there should be a provision for how the company will continue. The primary problem is settling how ownership percentages (the "Membership Interest") will be distributed. When a Member withdraws, his/her ownership percentage must be distributed somehow.

  Here is a common way to handle member buyouts:

  • Members will first be offered the option to buy the remaining ownership together. In this case, the remaining Members will pay an equal amount of the withdrawing Member's contribution and will receive an equal percentage of ownership in return.
  • If, for some reason, all Members do not agree to buy the ownership together, Members will then be given another period of days to buy the ownership on their own. In this case, the single Member will pay the entire amount of the withdrawing Member's contribution and will receive all of their ownership percentage in return. The time period allotted for each is defined by the Operating Agreement.
  • Finally, if a buy-out is not achieved by the end of the second period, the withdrawing Member, or their estate, may sell to whomever the withdrawing Member or estate chooses.

  Conditions for Dissolution

  Deciding what happens when the business is dissolved may seem like putting the cart before the horse, but it can prevent legal problems and headaches down the road. Consider how to handle assets, cash on hand, and debts if the LLC is ever dissolved, and do so before finalizing your Operating Agreement. Also choose the type of vote necessary if the Members decide to dissolve the LLC without a withdrawal or death of a Member.

  Signing, Notarizing and Keeping Copies

  All members should sign the LLC Operating Agreement to make it official. You can do this electronically via RocketSign®. Notarization is typically not required for your Operating Agreement to be legally effective, but some organizations such as title companies, financial institutions, or investors may require notarization to buy property, open a bank or credit account, or secure funding for your LLC.

  A copy of the Operating Agreement can be kept with the LLC’s official company records and all members should keep a separate copy in their personal records. If additional Members are added to the LLC later, they should sign and receive their own copy of the Operating Agreement.

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• LLC Operating Agreement Requirements by State

  Many states do not require LLCs to create Operating Agreements. In fact, most do not. But that doesn’t mean you shouldn’t create one. These agreements allow you to customize your business structure, avoid generic state rules, and guard your limited liability.

  Keep in mind that no state requires LLCs to file their Bylaws or Operating Agreements with the Secretary of State. Instead, simply keep them with your records.

  Find out if your business needs an LLC Operating Agreement. Requirements vary from state to state.

  State	Requirement
  Alabama	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Code of Alabama Title 10A, Chapter 5A: Alabama Limited Liability Company Law of 2014 (AL Code § 10A-5A-1.08).
  Alaska	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Alaska Statutes Title 10, Chapter 10.50: Alaska Revised Limited Liability Company Act (AK Stat § 10.50.095).
  Arizona	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Arizona Revised Statutes Title 29. Partnership (AZ Rev Stat § 29-3105).
  Arkansas	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Arkansas Code Title 4, Subtitle 3, Chapter 38 Uniform Limited Liability Company Act (AR Code § 4-32-405).
  California	Required. “Each limited liability company shall maintain in writing or in any other form capable of being converted into clearly legible tangible form at the office referred to in subdivision (a) all of the following: [...] (5) A copy of the limited liability company’s operating agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed.” Cal Corp Code § 17701.13. California LLCs are required to have an Operating Agreement and this agreement (and all amendments to it) must be kept with the company’s records. Topics not expressly outlined in your Operating Agreement are governed by California Corporations Code Title 2.6: California Revised Uniform Limited Liability Company Act (Cal Corp Code § 17701.01 through 17713.13)
  Colorado	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Colorado Revised Statutes Title 7. Corporations and Associations, Article 80 (CO Rev Stat § 7-80).
  Connecticut	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Chapter 613a, Uniform Limited Liability Company Act (CT Gen Stat § 34).
  Delaware	Required. “A limited liability company agreement shall be entered into or otherwise existing either before, after or at the time of the filing of acertificate of formation and, whether entered into or otherwise existing before, after or at the time of such filing, may be made effectiveas of the effective time of such filing or at such other time or date as provided in or reflected by the limited liability company agreement.” - DE Code § 18-201(d) Delaware requires an Operating Agreement at some time before, during, or after filing LLC formation paperwork. Topics not expressly outlined in your Operating Agreement are governed by Delaware Title 6, Chapter 18: Limited Liability Company Act (DE Code § 18).
  Florida	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Florida Title XXXVI Business Organizations, Chapter 605, Florida Revised Limited Liability Company Act (FL Stat § 605).
  Georgia	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Georgia Code Title 14, Chapter 11 Uniform Limited Liability Company Act (OCGA § 14-11).
  Hawaii	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Hawaii Revised Statutes Chapter 428: Uniform Limited Liability Company Act (Haw. Rev. Stat. § 428).
  Idaho	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Idaho Statutes Title 30, Chapter 25: Limited Liability Companies (Idaho Code § 30-25).
  Illinois	Not required but may be recommended. Without an Operating Agreement, disputes are governed by the Illinois Limited Liability Company Act (805 ILCS 180/).
  Indiana	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Indiana Code Title 23, Article 18: Limited Liability Companies, also known as the “Indiana Business Flexibility Act” (IC 23-18).
  Iowa	Not required but may be recommended. Without an Operating Agreement, disputes are governed by the Iowa Code Title XII, Chapter 489: Revised Uniform Limited Liability Company Act (IA Code § 489.110).
  Kansas	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Kansas Statutes Chapter 17, Article 76: Limited Liability Companies (KS Stat § 17-7662 through 17-76,146).
  Kentucky	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Kentucky Revised Statutes Chapter 275: Limited liability companies (KY Rev Stat § 275)
  Louisiana	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Louisiana Revised Statutes Title 12, Chapter 22: Limited Liability Companies (Louisiana R.S. Tit. 12).
  Maine	Required. “The limited liability company agreement may be entered into either before, after or at the time of the filing of a certificate of formation. Whether entered into or otherwise existing before, after or at the time of the filing of a certificate of formation, a limited liability company agreement may be made effective as of the formation of the limited liability company or at another time or date as provided in or reflected by the limited liability company agreement;” - ME Rev Stat § 1531 In Maine, an Operating Agreement must be entered into before, after, or during the time of filing for an LLC. This agreement can be written, oral, or even implied. In other words, it’s a fairly lenient law, but it is still a requirement in Maine. Put it in writing to avoid problems down the line. Topics not expressly outlined in your Operating Agreement are governed by Maine Statutes Title 31, Chapter 21, Subchapter 2: Limited Liability Company Agreement (ME Rev Stat Tit. 31 § 21).
  Maryland	Not required but may be recommended. Without an Operating Agreement, disputes are governed by the Maryland Limited Liability Company Act (Maryland Code, Corporations and Associations § 4A-101 to § 4A-1303).
  Massachusetts	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Massachusetts General Laws, Part I, Title XXII, Chapter 156C: Limited Liability Company Act (MA Gen L ch 156C).
  Michigan	Not required but may be recommended. Without an Operating Agreement, disputes are governed by the Michigan Limited Liability Company Act (Mi § 450.4101 - 450.5200).
  Minnesota	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Minnesota Statutes, Chapter 322c: Minnesota Revised Uniform Limited Liability Company (MN R.S. § 322C).
  Mississippi	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Mississippi Code Title 79, Chapter 29: Revised Mississippi Limited Liability Company Act (MS Code § 79-29).
  Missouri	Required. “The member or members of a limited liability company shall adopt an operating agreement containing such provisions as such member or members may deem appropriate, subject only to the provisions of sections 347.010 to 347.187 and other law.” - RSMo § 347.081 Missouri LLCs must create an Operating Agreement, but it can be written or oral. It should cover the conduct of the business, the affairs of the LLC, and the rights, powers, and duties of its members, managers, agents, or employees. Disputes will be governed by Missouri Title XXIII, Chapter 347: Limited Liability Companies (RSMo Chapter 347) when the Operating Agreement’s provisions are inconsistent with Moussori law or otherwise not included in the Operating Agreement.
  Montana	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Montana Code Title 35, Chapter 8: Montana Limited Liability Company Act (MT CODE ANN § 35-8).
  Nebraska	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Revised Statutes of Nebraska, Chapter 21, Article 1: The Nebraska Uniform Limited Liability Company Act (NE Code §§ 21-101 to 21-197 and §§ 21-501 to 21-542).
  Nevada	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Nevada Revised Statutes Chapter 86: Limited-Liability Companies (NRS Chapter 86).
  New Hampshire	Not required but may be recommended. Without an Operating Agreement, disputes are governed by New Hampshire Revised Statutes Title XXVIII, Chapter 304-C: Limited Liability Companies (NH Rev Stat § 304-C).
  New Jersey	Not required but may be recommended. Without an Operating Agreement, disputes are governed by New Jersey Statutes Title 42, Chapter 42:2C: Revised Uniform Limited Liability Company Act (N.J. Stat. § 42-2C).
  New Mexico	Not required but may be recommended. Without an Operating Agreement, disputes are governed by New Mexico Statutes Chapter 53, Article 19: Limited Liability Company Act (NMSA § 53-19-1 to 53-19-74).
  New York	Required. “§ 417. Operating agreement. (a) Subject to the provisions of thischapter, the members of a limited liability company shall adopt awritten operating agreement that contains any provisions notinconsistent with law or its articles of organization relating to (i)the business of the limited liability company, (ii) the conduct of itsaffairs and (iii) the rights, powers, preferences, limitations orresponsibilities of its members, managers, employees or agents, as thecase may be.” - NY Limit Liab Co § 417 Limited Liability Companies in New York must have a written Operating Agreement. This document should include provisions relating to the business of the LLC, the conduct of its affairs, and the rights, preferences, limitations, or responsibilities of its members. Disputes will be governed by Consolidated Laws of New York Chapter 34: Limited Liability Company Law (NY Limit Liab Co §§ 101 through 1403) when the Operating Agreement’s provisions are inconsistent with New York State laws or otherwise not included in the Operating Agreement.
  North Carolina	Not required but may be recommended. Without an Operating Agreement, disputes are governed by North Carolina General Statutes Chapter 57D: North Carolina Limited Liability Company Act (NC Gen Stat § 57D).
  North Dakota	Not required but may be recommended. Without an Operating Agreement, disputes are governed by North Dakota Century Code Chapter 10-32.1: North Dakota Uniform Limited Liability Company Act (ND CENT CODE §§ 10-01.1-01 through 10-36-09).
  Ohio	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Ohio Revised Code Chapter 1706: Ohio Revised Limited Liability Company Act (OH Rev Stat §§ 1706.01 through 1706.84).
  Oklahoma	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Oklahoma Statutes Title 18: Oklahoma Limited Liability Company Act (OK Stat § 18-2001).
  Oregon	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Oregon Revised Statutes Chapter 63: Limited Liability Companies (OR Rev Stat Chap 63).
  Pennsylvania	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Pennsylvania Unconsolidated Statutes, Title 15, Part III: Partnerships and Limited Liability Companies (PA Cons Stat § 8101 to 8106).
  Rhode Island	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Rhode Island General Laws Title 7, Chapter 16: The Rhode Island Limited-Liability Company Act (R.I. Gen. Laws § 7-16).
  South Carolina	Not required but may be recommended. Without an Operating Agreement, disputes are governed by South Carolina Code of Laws Title 33, Chapter 44: Uniform Limited Liability Company Act of 1996 (SC Code § 33-44).
  South Dakota	Not required but may be recommended. Without an Operating Agreement, disputes are governed by South Dakota Codified Laws Chapter 47-34A: Uniform Limited Liability Company Act (SD Codified L § 47-34A).
  Tennessee	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Tennessee Code Title 48: Corporations & Associations (Tenn. Code Tit. §§ 48-201-101 through 48-250-115).
  Texas	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Texas Business Organizations Code Title 3, Chapter 101: Limited Liability Companies (TX Bus Orgs Tit. 3 Sec. 101).
  Utah	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Utah Code Title 48, Chapter 3a: Utah Revised Uniform Limited Liability Company Act (UT Code § 48-3a).
  Vermont	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Vermont Statutes Title 11, Chapter 25: Limited Liability Companies (VT ST Tit. 11 § 4001 to 4176).
  Virginia	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Code of Virginia Title 13.1, Chapter 12: Virginia Limited Liability Company Act (VA Code § 13.1).
  Washington	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Revised Code of Washington Title 25.15: Limited Liability Companies (WA Rev Code § 25.15).
  West Virginia	Not required but may be recommended. Without an Operating Agreement, disputes are governed by West Virginia Code Chapter 31b: Uniform Limited Liability Company Act (WV CODE § 31B).
  Wisconsin	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Wisconsin Statutes Chapter 183: Limited Liability Company Law (Wis. Stats Chapter 183).
  Wyoming	Not required but may be recommended. Without an Operating Agreement, disputes are governed by Wyoming Statutes Title 17, Chapter 29: Wyoming Limited Liability Company Act (WY ST § 17-29).

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LLC Operating Agreement FAQs

• Do I need an LLC Operating Agreement?

  Whether you need it depends on your state and situation, but overall Operating Agreements are very useful documents and are a good idea for any business. Here are some of the top reasons to create an LLC Operating Agreement.

  Your state may require one. The guidelines vary by state, but certain states require you to have an LLC Operating Agreement, including Delaware, California, New York, Maine, or Missouri.

  You may need one to open a business bank or credit account, buy property, or secure funding. Many financial institutions require businesses to have an operating agreement to open an account or work on behalf of a business. This can include real estate financing (mortgages) when buying a property.

  Multiple members may want to outline how much they each contributed and how the business will protect their interests. If you are not in business alone, it’s important to get financial, organizational, and operational details in writing. An Operating Agreement will define the rights and responsibilities of each principal of the LLC. It will also explain what happens if a principal decides to leave, including how a principal may transfer or sell their interest in the LLC.

  Your personal protection against liability could be impacted. LLCs, especially one-person LLCs, are given much more respect by courts if they’ve created an LLC Operating Agreement. Having an Operating Agreement provides evidence that you keep your business and your personal life separate, which will help you avoid personal liability for things that go wrong on the business side of your life. Without the formality of the operating agreement, your company may be viewed as a partnership or sole proprietorship, leaving you and your personal assets at risk.

  You may want to customize your business structure and avoid your state’s default rules. Having an Operating Agreement also prevents your business from being subject to your state’s standard Operating Agreement, which may not be as beneficial for your particular business because it is a one-size-fits-all agreement.

  Moreover, a great advantage of having an LLC is choosing how you’ll split profits, work-load, distribution of shares, and more. In more rigid structures like S-corps or C-corps, you have less flexibility to choose the roles and rights of each business owner.

  For example, in a C-corp, if you’ve invested 20% of the capital in the company, you’re likely to receive 20% of the profits or losses. An LLC allows you to set this up differently depending on your situation. For example, say that our hypothetical 20% owner actually does 80% of the work, whereas her partner invested 80% but does only 20% of the work. In their Operating Agreement, these partners could choose to split the profits and losses 50-50.

• Do single-member LLCs need an Operating Agreement?

  While single-member LLCs do not usually need an Operating Agreement, it is recommended. Here are some of the many ways an Operating Agreement can help a single-member LLC:

  • It can show how you plan to separate your own expenses from the business.
  • It may help if you are seeking funding.
  • It can be used to appoint someone to run your business if you are unable to do so yourself.
  • Insurance companies may ask for it.
  • It can be used to define rules specific to your business.

• What is the difference between Articles of Organization and an Operating Agreement?

  Articles of Organization and Operating Agreements are both critical documents that relate to starting an LLC, but there are a few key differences between the two. Articles of Organization (also called Certificates of Formation) are an LLC formation document filed with the state to register your company as a legal business entity. If you form an LLC with Rocket Lawyer, we file this document on your behalf. An LLC Operating Agreement, on the other hand, is an internal document that outlines how the business will be run.

• If I have an LLC Operating Agreement, do I need a Business Plan?

  Your business should have both of these important documents. While they do have a bit of overlap, they serve different purposes. The Operating Agreement is intended to outline how the business is run. The Business Plan communicates other business information, such as market research, financial plans, product specifications, and funding needs.

  If you have additional questions before making your LLC Operating Agreement, ask a lawyer, or check out more resources for starting a business.

• Which state LLC Operating Agreement should I make?

  Generally speaking, you do not need to make an LLC Operating Agreement for every state that you do business in. In most cases, you'll just want to write one for the state your LLC is registered in. If you operate multiple LLCs that are registered in different states, then you may need one for each company in each state. If you have questions about businesses you run in other states, ask a lawyer.

• Should I make an LLC Operating Agreement now or after I have formed an LLC?

  Although you're able to make an Operating Agreement at any time, it's often best to make one at the very beginning to help guide all business decisions. This is especially true in a partnership, where you can establish the guidelines of operation early in order to reduce misunderstandings later.

  However, you can make an LLC Operating Agreement at any time when you discover the need to document the details of your agreement and how to run your business.

• Do I need to file my Operating Agreement with the state?

  Even in those states where they are required, LLC Operating Agreements do not get filed with the state. However, you may be required to keep your Operating Agreement with your corporate records and amend it as your business changes.

  However, along with your LLC registration, S-corp filing, or C-corp filing, you will likely need to get a Registered Agent and file an Annual Report, as well as Articles of Amendment should you make changes to your business. Make sure you have a clear understanding of your state’s requirements for starting and maintaining an LLC so you are always in full compliance with the rules.

• Do I need to hire a lawyer to draft my Operating Agreement?

  You generally don’t need a lawyer to create operating agreements that leverage commonly used operating terms. Rocket Lawyer documents are vetted by lawyers and legal staff so that you can use them with confidence.

  That said, it’s common to have questions or want an expert to weigh in. In this case, you can simply ask a lawyer legal questions about your Operating Agreement or your LLC, or request a review of your drafted LLC Operating Agreement. In these cases, you can save time and money by first drafting an LLC Operating Agreement using Rocket Lawyer, and then ask a lawyer to review it, answer questions you may have, or add any clauses or legal terms that are unique to your situation.

  It may be advisable to also work with an attorney if you are making an LLC Operating Agreement for complex business situations, such as businesses with many members, complex ownership structures, or less common voting procedures. Businesses with a non-voting member class may also want to work with an experienced attorney. Reach out to a Rocket Lawyer network attorney to get started on an LLC Operating Agreement for your unique situation.

• 

  Make this document

  Customize your LLC Operating Agreement by answering simple questions. We’ll help you along the way and build a document that fits your needs. Plus, you can always save and continue later once you’ve started your document creation process. Get started now!

• 

  Review the agreement

  Look over your customized LLC Operating Agreement to ensure it matches your intentions. You may also want to review the agreement with any other parties to avoid delays at signing.

  Remember that if you have any questions you can easily ask a question for free or get affordable legal advice when you connect with a Rocket Lawyer network attorney.

• 

  Sign this document

  This Operating Agreement must be signed by:
  

  • All LLC Member(s)

  Neither witnesses nor notarization are required for the Operating Agreement to be effective.

  Securely sign online and invite others to sign with RocketSign®

• 

  Keep two copies

  The LLC should keep one copy of the Operating Agreement with its corporate records. The Member should keep a separate copy for their personal records.

  If additional Members are added to the LLC later, they should sign and receive their own copy of the Operating Agreement.

• Important Details

  • A LLC Operating Agreement is used after a Limited Liability Company has already been formed through your Secretary of State's office. The Agreement allows your company to customize and control your LLC's operating rules. Without the Agreement, your LLC will operate under the state's default LLC laws.
  • Reminder: Under the terms of Article V, Tax Treatment Election, the Company has already or will file Form 8832 with the Internal Revenue Service and affirmatively elect to be treated as a corporation for federal tax purposes. The Company must take this step in order to receive federal corporate tax status.