What Is a Minnesota LLC Operating Agreement?
A Minnesota LLC operating agreement states the rules that your LLC will follow for governance and management. It can be oral, written, or implied, and it includes all amendments made to the original agreement.
Your MN LLC operating agreement can cover various elements of running your LLC, including the following:
- Bookkeeping procedures
- Capital contributions
- Voting powers
- Profit and loss distribution
- Business dissolution
- Membership interest
- Ownership percentages
By writing a Minnesota LLC operating agreement for your Minnesota company, you can lift the control that default state laws would otherwise have over how your LLC operates.
Is an Operating Agreement Required for Minnesota LLCs?
An operating agreement is not required for Minnesota LLCs. However, members should consider writing one anyway, as it protects their limited liability status. With this agreement in place, creditors can only go after the LLC if it experiences financial difficulties. They won’t be able to pursue the assets of individual members.
Both multi-member and single-member LLCs can benefit from having an operating agreement. Even if you’re the sole member, this document helps you prove that you own the LLC. This can be useful if you need to open a business bank account or take out a loan.
How to Form an LLC in Minnesota
A Minnesota LLC operating agreement lets you set the rules for your entity, but you must file the articles of organization with the Minnesota Secretary of State. The articles become part of the public record, while your operating agreement remains private.
What to Consider When Writing a Minnesota LLC Operating Agreement
Maximize the effectiveness of your operating agreement for your Minnesota LLC by knowing what rules you can and can’t incorporate. Review the key considerations below:
- Prevent accidental or implied rules changes. Your Minnesota LLC operating agreement should include an “integration clause,” which clarifies that it overrides any prior oral or informal agreements. This is essential because MN Stat § 322C.0102, Subd. 17 recognizes oral and implied operating agreements, as well as those in a written record.
- Clarify what management structure you want. MN Stat § 322C.0407 establishes a member-managed LLC by default. However, you can change it to a manager-managed or board-managed LLC using your operating agreement.
- Give members more freedom. MN Stat § 322C.0110, Subd. 3 & 4, does not allow you to eliminate the duty of loyalty or the duty of care. However, your operating agreement, as long as it’s not manifestly unreasonable, can permit certain actions that grant greater flexibility. For example, you may allow a member to own a separate, non-competing company. You may also alter the duty of care if it does not permit intentional misconduct.
- Divvy up voting rights. MN Stat § 322C.0407 and MN Stat § 322C.0404 grant one vote per person in an LLC. If you want to tie voting rights to capital contributions or membership percentages, you must record these preferences in your MN operating agreement.
- Protect your LLC from financial distress. Minnesota state law requires an LLC to indemnify members, managers, and board members if they are sued in connection with their duties related to the company. However, your MN operating agreement can override this requirement (MN Stat § 322C.0110), which can prevent your LLC from needing to drain its funds to pay for a member’s, manager’s, or board member’s legal defense.
Sample Minnesota LLC Operating Agreement
View our sample Minnesota LLC operating agreement to see how to structure your contract. Establish custom rules for your LLC using our guided form. Then download it in PDF or Word format to get copies you can distribute to your members, managers, board members, and requesting entities.
