LLC Operating Agreement Template

What Is an LLC Operating Agreement?

An LLC operating agreement is a legal contract between the owners (members) of a limited liability company (LLC). It outlines how the business is structured, managed, and operated, helping prevent disputes and ensuring smooth operations.

An operating agreement also addresses some of the legal protections and benefits an LLC gives its owners, limiting the potential for conflict later on. Some states legally require LLCs to have an operating agreement to remain compliant.

While an operating agreement outlines how the business is structured and managed, articles of organization are formal documents that formally establish the LLC. Filed with the Secretary of State, they provide essential details such as the company’s management structure, ownership, and principal business address to ensure compliance with state requirements.

Why Your LLC Needs an LLC Operating Agreement

An LLC operating agreement is more than just paperwork — it’s your company’s legal backbone. It provides a formal, written recognition of the separation between the company and its owner(s). Without an operating agreement, owners may risk personal liability for the activities of the company.

An operating agreement also helps owners and managers create a clear structure for running the company. The various structural needs that an operating agreement can address for an LLC include the following:

• Voting rights and procedures
• Managing ownership interests
• Resolving conflicts and disputes among stakeholders
• Dissolving the LLC upon a terminating event

An operating agreement may also address needs for an LLC that are specific to its ownership structure, industry, and the state(s) where it engages in business.

Additional Key Business Requirements for LLCs

Other common formalities for LLCs to follow include:

• having enough funds in the business to meet ordinary costs and expenses
• using the LLC’s name when conducting business
• holding annual meetings and filing annual reports with the Secretary of State
• having a separate bank account for the LLC to conduct business

Having an LLC operating agreement is an essential first step for complying with these other requirements. For example, most financial institutions require a copy of the operating agreement before opening an account in the company’s name. Lenders and investors are also likely to require proof of the operating agreement before providing liquidity to the company.

What Type of LLC Operating Agreement Do I Need?

The type of LLC operating agreement template you need will depend on the number of owners the company has.

Single-Member LLC Operating Agreement

If you are the only owner of the company, then you will likely need a single-member LLC operating agreement. These agreements are generally less complex than multi-member LLC operating agreements because all authority typically belongs to one member, and there is less risk of internal conflict.

Multi-Member LLC Operating Agreement

In comparison, LLCs with more than one owner will need a multi-member LLC operating agreement. Multi-member operating agreements are generally more complex because of the different issues that exist when multiple parties have an interest in the company as opposed to a single party.

For example, multi-member operating agreements often have terms that define each party’s membership interest in terms of outstanding units or percentages. Additional concepts that a multi-member LLC operating agreement can address include:

• Adding or removing members from the company
• Selling or transferring a member’s ownership interest
• Voting on key business decisions
• Establishing a priority for distributions or profit sharing among members
• Making additional capital contributions to support the business

Members will want to carefully consider how these terms within a multi-member LLC operating agreement template impact their individual rights and duties as owners.

You can access each type of LLC operating agreement below and use our editor to directly customize the template to fit your specific business needs.

Single Member LLC

This document governs the operations of an LLC with only one member (owner).

Multi Member LLC

This agreement is for LLCs with two or more members, each of whom holds a membership interest in the company.

Do LLC Operating Agreements Have State-Specific Laws?

Yes, most states have a Limited Liability Company Act or similarly enacted legislation that governs the operation of LLCs with rules varying by location. For example, some state laws may restrict who can own an LLC.

Additionally, the following states require LLCs to have a signed operating agreement to legally exist in the state:

• California
• Delaware
• Maine
• Missouri
• New York

You can select your state below and learn more about state-specific laws. You can then use Legal Templates’ document editor to customize an attorney-drafted LLC operating agreement that meets your state requirements. Or, if you’re ready to start drafting now, use the drop-down to choose your state and start filling out your agreement using our guided editor.

How To Write an LLC Operating Agreement

Writing an LLC operating agreement involves outlining key company details, defining ownership and management structures, and setting rules for decision-making, profit distribution, and dispute resolution. A well-drafted agreement helps protect your business and prevent legal disputes. Use our LLC operating agreement document editor to simplify the process and ensure your agreement is legally sound.

Follow these steps to create a comprehensive LLC operating agreement:

1. Basic Information

The LLC operating agreement begins with basic information about the company, such as:

• Name of the LLC
• Formation date
• Principal place of business
• Purpose of the business

The agreement will also identify the registered agent for the company. This is the person or entity responsible for receiving and sending legal notices on behalf of the LLC. A registered agent could be a member, manager, attorney, or another representative of the business.

2. Ownership Structure

Your next step will be to identify the ownership structure by each member’s name and ownership interest percentage. A single-member LLC will have one owner with a 100 percent ownership interest in the company. Meanwhile, a multi-member LLC will have two or more owners.

The ownership structure will also state the initial capital contributions each member is making in exchange for their ownership interest. The operating agreement will state the nature and value of the capital contribution, which could be cash proceeds, real or personal property, or future services the member will provide the LLC.

3. Member Roles & Responsibilities

LLC members will have several duties related to their ownership interest and their involvement in the company. The operating agreement will explain these responsibilities. Examples may include procedures for supplying new capital to the business or expectations for members engaging in business deals that occur outside the company.

4. Profit & Loss Allocation

An LLC operating agreement can also establish the method for sharing profits and losses among its members. It will state the percentage distribution to members, which is commonly in proportion to their ownership percentage.

However, some operating agreements may contain priority allocations to members based on their role. For example, a member providing the bulk of the initial capital contribution may desire priority in the distribution of profits or losses.

5. Voting & Decision-Making

The LLC operating agreement example will detail the voting and decision-making process for the company. This may include the appointment of a manager with authority to make day-to-day decisions on behalf of the company.

The operating agreement can also outline specific items that require a passing vote from the members. These are typically major business developments, such as entering into certain contracts, adding new members, or accepting an offer to sell the company.

6. Adding/Removing Members

Adding or removing members from an LLC is a fundamental issue the LLC operating agreement should address. The agreement will explain the process for approving this decision and the applicable limitations on who can become a member.

For example, some operating agreements may prevent a member from transferring their membership interest to a trust, spouse, or family member without the consent of the other members.

7. Dissolution & Exit Strategy

All LLCs have beginnings and endings. The operating agreement will address the details of this process. Common scenarios where an exit strategy will be necessary include:

• The death of a member
• The business closing
• The LLC merging with another company or getting bought by another party

Submitting and Storing Your LLC Operating Agreement

Once signed, give all members a copy of the operating agreement for their records. You may also want to have copies available at the following locations:

• LLC’s legal counsel
• LLC’s registered agent
• LLC’s principal place of business

Banks, lenders, investors, and other parties may also require a copy of the operating agreement before approving funding.

LLC operating agreements often include sensitive business information. To protect your business, only share essential parts of the operating agreement with third parties as needed. If sensitive information is included, consider using a non-disclosure agreement to safeguard your company’s confidentiality. It may also be necessary to redact certain details before providing a copy to outside parties.

Updating Your LLC Operating Agreement

Over time, you may need to amend the terms of the operating agreement because of changes in the company. These events may include:

• Adding or removing members
• Obtaining new investments or financing
• Making new policy changes

To update the agreement, you should use an amendment to the LLC operating agreement, which formally documents any changes to the original terms. This ensures that all modifications are legally valid.

You will want to store all current and prior versions of the signed LLC operating agreement with the company’s minute book. The minute book contains essential information about the LLC, including meeting minutes, a copy of articles of organization, and all consent resolutions documenting the key decisions of the company.

Sample LLC Operating Agreement

Below, you can view a sample LLC operating agreement. You can customize this template using our document editor and then download in PDF or Word format.

How Our LLC Operating Agreement Solution Helps You

Creating an LLC operating agreement doesn’t have to be complex or costly. Our LLC operating agreement document editor makes it easy to create a simple and effective solution for your LLC’s needs. You can choose a state-specific LLC operating agreement template for compliance in your jurisdiction and customize the agreement to fit your needs.

Legal Templates’ document editor offers instant access for you to edit, download, and print the operating agreement. The guided assistance in the document editor also gives step-by-step instructions to help you draft the LLC operating agreement to meet your preferences.

Frequently Asked Questions