Key Takeaways 1. An LLC operating agreement generally outlines ownership, management, voting, and internal business procedures. 2. In most cases, it helps members put important business terms in writing instead of relying only on state default rules. 3. Both single-member and multi-member LLCs can benefit from having one in place. 4. State rules vary — for example, New York requires a written operating agreement within 90 days of filing, and Missouri requires members to adopt one. 5. 360 Legal Forms lets you customize your document online and download it in a ready-to-use PDF or Word format — free to start.
In most cases, an operating agreement is one of the most useful internal documents an LLC can have. It can help clarify expectations, reduce disputes, and show that the business is being run as a separate legal entity. Rules vary by state, so using a state-specific form is important.
What Is an LLC Operating Agreement?
An LLC operating agreement is a written document commonly used to explain how a Limited Liability Company will be owned and managed. It usually covers each member’s role, ownership share, voting rights, and how profits, losses, or business decisions may be handled.
In most cases, it serves two practical purposes:
- Internal structure: It explains how the LLC is intended to operate on a day-to-day and decision-making level.
- Business separation: It helps document that the LLC is being treated as its own business entity, separate from its owners.
Once signed, it generally becomes the main internal reference point for how the LLC is supposed to run.
What Is the Purpose of an LLC Operating Agreement?
The U.S. Small Business Administration explains that operating agreements are commonly used for three main reasons:
- To help support the LLC’s separate legal status. A written operating agreement can help show that the business is operating distinctly from its owners.
- To put important business terms in writing. This can reduce misunderstandings between members later.
- To address matters not fully customized by default state rules. In many states, LLC statutes supply fallback rules when the members have not agreed otherwise.
Important: Operating agreements are generally internal records and are not typically filed with the state. State-specific exceptions and practices can apply.
Who Needs an LLC Operating Agreement?
In most cases, any LLC can benefit from a written operating agreement.
Multi-member LLCs
For LLCs with more than one owner, this document can help explain:
- how decisions are made
- how profits and losses may be allocated
- what happens if a member leaves, joins, or disagrees with the others
Single-member LLCs
Even a single-member LLC may benefit from an operating agreement. It can help document how the company is structured and may be useful when dealing with banks, lenders, or other third parties.
LLCs seeking funding or banking services
Some institutions may ask for an operating agreement as part of their onboarding or review process. Practices vary, but many business owners choose to prepare one early to avoid delays later
Any LLC — regardless of size, state, or number of members — should have a written operating agreement. Specifically:
What Should Be Included in an LLC Operating Agreement?
Operating Agreement Terms
- Corporate Veil: The legal separation between an LLC and its members. A written operating agreement helps maintain this separation, protecting personal assets from business liabilities.
- Member-Managed LLC: An LLC structure in which all members participate directly in running the business and share management authority equally.
- Manager-Managed LLC: An LLC structure in which one or more designated managers — who may or may not be members — handle day-to-day operations while other members are passive investors.
- Pass-Through Taxation: A tax arrangement where LLC profits and losses pass directly to members' personal tax returns, avoiding corporate-level taxation.
- Dissolution: The formal process of winding down and closing an LLC, including settling debts, distributing remaining assets, and filing required paperwork with the state.
- Buy-Sell Agreement: A provision within the operating agreement specifying what happens to a member's ownership interest if they die, become disabled, resign, or wish to sell their stake.
What Happens If an LLC Doesn't Have an Operating Agreement?
If an LLC does not have an operating agreement, state default rules will often fill in the gaps. That may be workable in some cases, but it can create uncertainty if the members expected different rules for voting, management, distributions, or ownership changes.
Depending on the situation, operating without a written agreement may also make it harder to show how the LLC is intended to be run and how member responsibilities are divided. That is one reason the SBA generally advises business owners to maintain an operating agreement.
Bottom line: In most cases, a written operating agreement helps create clarity before problems arise.
How to Create an LLC Operating Agreement with 360 Legal Forms
Creating a legally valid LLC operating agreement with 360 Legal Forms takes less than 10 minutes:
- Choose your state: Select your state from the dropdown. Your form is automatically customized for your jurisdiction's requirements.
- Answer simple questions: Our step-by-step questionnaire guides you through every required field — management structure, ownership percentages, voting rights, dissolution terms — in plain English.
- Preview your document: See your completed operating agreement before downloading.
- Download instantly: Save as a PDF or Word file immediately — no waiting, no printing required.
- All members sign: Every member must sign the agreement for it to be legally binding. All parties can sign electronically through 360 Legal Forms — valid under the federal E-SIGN Act (15 U.S.C. §7001).
- Store securely: Keep signed copies in your business records. The agreement is NOT filed with the state.
How to Draft an LLC Operating Agreement — What You'll Need
Have the following information ready before starting. 360 Legal Forms guides you through every field:
- LLC Name: Must include 'Limited Liability Company,' 'LLC,' or 'L.L.C.' — exactly as registered with the Secretary of State
- State of Formation: The state where your LLC was officially formed and registered
- Date of Formation & Effective Date: When the LLC was formed and when the operating agreement takes effect (may be the same date or different)
- Registered Agent: Name and physical address of your designated registered agent — required by all 50 states
- Member Information: Full legal name and mailing address of each member
- Ownership Percentages: The ownership share (by percentage) that each member holds in the LLC
- Capital Contributions: The initial amount of money or assets each member contributed to start the LLC
- Management Structure: Whether the LLC will be member-managed (all members share control) or manager-managed (designated managers run day-to-day operations)
- Tax Treatment: How the LLC elects to be taxed — as a sole proprietorship (disregarded entity), partnership, or S-Corp
- Business Purpose: A description of the LLC's business activities. Broad language like 'any lawful business purpose' is acceptable in most states
- Dissolution Terms: The conditions under which the LLC will be dissolved — on a specific date, upon a vote of members, or upon a triggering event
LLC Operating Agreement Signing Requirements
Signing practices can vary depending on the LLC structure and state law, but in most cases it is best for each current member to sign the operating agreement and keep a copy with the company’s records.
Here are the main points:
- The operating agreement is generally an internal company document rather than a state filing.
- Electronic signatures are generally recognized under federal law, subject to applicable requirements.
- Notarization is typically not required unless a specific use case, lender, or related document calls for it.
- New York requires a written operating agreement, and the statute says it must be adopted by the members.
This is safer than saying “all members must sign for it to be valid” across the board.
Note: In New York, the operating agreement must be written and adopted within 90 days of filing the Articles of Organization (NY LLC Law §417).
What to Do with Your Operating Agreement
Once all members have signed your operating agreement:
- Store it with your core business records: Keep the signed original in your company files alongside your Articles of Organization, EIN confirmation, and other formation documents.
- Every member keeps a copy: Each member should have their own signed copy. You may download and print as many copies as needed from your 360 Legal Forms account.
- Keep it confidential: The operating agreement is a private internal document. It is not a public record and should not be shared outside the membership without reason.
- Store a digital backup: Scan the signed document and store it securely in an encrypted cloud account. This is essential if a paper copy is ever lost or damaged.
- Review and update it regularly: Any time a major change occurs — a new member joins, an existing member departs, ownership percentages change, or the business pivots — the operating agreement should be amended and re-signed by all members.
Can I Modify My LLC Operating Agreement?
Yes — an LLC operating agreement can be amended at any time, provided the amendment follows the procedures set out in the agreement itself. Typical requirements include:
- A vote of all members (or the percentage specified in the agreement) to approve the amendment
- The amendment must be in writing
- All members must sign the amendment
- Common reasons to amend an operating agreement include:
- Adding a new member to the LLC
- A member leaving, transferring, or selling their ownership interest
- Changing the management structure (e.g., from member-managed to manager-managed)
- Updating ownership percentages after a new capital contribution
- Changing the LLC's business purpose or name
- Adding a buy-sell or succession planning provision
Important: Any amendments must be consistent with your state's LLC laws and your original Articles of Organization. If the Articles and the operating agreement conflict, the Articles of Organization typically prevail.
LLC Operating Agreement — State Requirements at a Glance
Why Use 360 Legal Forms for Your LLC Operating Agreement?
- State-specific form builder: Create a document tailored to your state and business details.
- Attorney-vetted templates: Start from professionally prepared language designed for common LLC situations.
- Easy customization: Answer a guided questionnaire in plain English.
- Download in PDF or Word: Access your completed form in a format that works for your records.
- Online convenience: Create, review, and manage your document from one account.
Bibliography & References
Federal Resources
1. U.S. Small Business Administration Basic Information About Operating Agreements Official federal guidance on the purpose and importance of LLC operating agreements.
2. Electronic Signatures in Global and National Commerce Act (E-SIGN Act) 15 U.S.C. § 7001 Cornell Law School Legal Information Institute Federal statute establishing the legal validity of electronic signatures in interstate commerce.
3. Internal Revenue Service — Limited Liability Company (LLC) IRS Small Businesses & Self-Employed. Federal tax classification and reporting requirements for LLCs.
State-Specific Legal References
1. California Revised Uniform Limited Liability Company Act (RULLCA) California Corporations Code § 17701.13 State Bar of California California's statutory framework governing LLCs, including operating agreement requirements.
New York Limited Liability Company Law § 417
1. NY Senate Legislation Database
New York statute requiring LLCs to adopt a written operating agreement within 90 days of formation.
Disclaimer: 360 Legal Forms is not a law firm and does not provide legal advice. This content is for general informational purposes only.
