"Limited Liability Company (LLC) Operating Agreement Template"

What Is an LLC Operating Agreement?

An LLC Operating Agreement is a key legal document of any limited liability company (LLC) that contains its contact details, describes the purpose of the business, outlines the structure of working and financial relationship between the company members, and their rights and duties as business managers.

An Operating Agreement is essential - even if you are an individual entrepreneur, you need to create a Single Member LLC Operating Agreement to confirm your limited liability, handle possible financial and managerial mishaps, and comply with the laws of the state while at the same time choosing your own internal regulations. If you choose not to compose this document, different disputes and disagreements will be decided in accordance with standard laws adopted by the state - you need to determine how to share profits and handle conflicts yourself. You can download an LLC Operating Agreement template below.

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How do I Write an Operating Agreement for an LLC?

Follow these instructions to compose an Operating Agreement for an LLC:

  1. Describe the formation of the company and state the contributions of its members. You need to determine how much capital each member is entitled to, and the percentage of their ownership usually correlates with the number of their contributions. Identify the registered agent of the company, principal place of business, and purpose of your organization.
  2. Specify how profits and losses are distributed among the members of the company. Profits and losses are shared based on distributive shares, not the capital percentage. It is possible to withdraw funds once a month, a quarter, twice a year, or whenever it is convenient.
  3. Record the structure of the company. Appoint individuals responsible for the management of the organization and specify the duties of each manager.
  4. Outline compensation for the members of the company and mention the reimbursement they will receive if they pay for any business-related expenses out of their own pockets.
  5. Confirm that all transactions and profits will be recorded and maintained. Choose accounting methods and policies and comply with them consistently in case there is an audit in the future.
  6. Figure out the procedure of the company dissolution - as soon as you start a business, you have to think about its liquidation which is usually conducted via the members' vote.
  7. Establish the rules under which members are allowed to sell their shares of ownership and separate themselves from the company. As a follow-up to the Operating Agreement, it is highly recommended to prepare an LLC Buyout Agreement - this document will clarify how to process the departure of the company member.
  8. Include a tax provision - you can operate as a partnership or sole proprietorship.
  9. Decide when and how you can approve changes to the Operating Agreement.
  10. Sign and date the agreement - all members of the company must appear in person to certify they agree with everything you put in writing.

States do not require LLCs to submit their Operating Agreements - retain them with other important documents and refer to them whenever you need to understand how to deal with financial and operational relations in your company.

How Much Does an LLC Operating Agreement Cost?

The cost of the LLC Operating Agreement is affected by the number of members in your organization, its plans for growth and investment, and the complexity of accounting operations that must be listed in full detail. You can seek the help of a professional lawyer who specializes in composing documents that stipulate managerial and financial rights and responsibilities of the LLC, and it will cost you anywhere between $300 and $5000. However, if you need a simple LLC Operating Agreement, you can manage without consultation and compose a proper document yourself including all the points and sections mentioned above.

How to Amend an LLC Operating Agreement?

Periodically, every LLC faces the necessity to modify something in their internal documentation - sometimes, it is required to change a single sentence. You should adhere to the procedure for making changes included in the agreement once it is first drafted. Generally, LLCs include a provision that requires 100% of the company members to agree to a change, but you can decide that a supermajority or majority of votes is enough to issue an amendment.

If you made a decision not to include the amendment clause in the Operating Agreement, simply comply with the state regulations - you may need unanimous approval of members or just a majority. Contact the Secretary of State office to learn the requirements for your location. Additionally, you can amend your LLC Articles of Organization to update information about your company available to the general public - file new documentation with the appropriate state agency to change the name of your company, physical or mailing address, or appoint a new registered agent for your organization.


Still looking for a particular template? Take a look at the related templates below:

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Download "Limited Liability Company (LLC) Operating Agreement Template"

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Limited Liability Company (LLC) Operating Agreement
____________________, LLC
Company Name
This LLC Operating Agreement (hereinafter referred to as the “Agreement”) is entered
into as of ________________, by and between _____________________, with a mailing
address of ______________________________________________________________
(hereinafter referred to as the “Member One”) and _____________________, with a
mailing address of ________________________________________________________
(hereinafter referred to as the “Member Two”), collectively referred to as the “Members,”
both of whom agree to be bound by this Agreement.
Article 1, The Limited Liability Company.
1.1. Formation. The Members have decided to form a limited liability company under
the name _____________________, LLC (hereinafter referred to as the “Company”) on
the terms and conditions in this Agreement and pursuant to the laws of the State of
_____________________ (hereinafter referred to as the “Act”).
State
The Members agree to file with the appropriate agency within the State of
_____________________ charged with processing and maintaining such records all
documentation required for the formation of the Company.
The rights and obligations of the parties are as provided in the Act except as otherwise
expressly provided in this Agreement.
1.2. Purpose. The purpose of the Company is to engage in any lawful act or activity for
which a Limited Liability Company may be formed within the State of
_____________________.
1.3. Office. The Company will maintain its principal business office within the State of
_____________________ at the following address:
________________________________________________________________________
1.4. Registered Agent. _____________________ is the Company's initial registered
agent in the State of _____________________, and the registered office is at the
following address:
________________________________________________________________________
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Limited Liability Company (LLC) Operating Agreement
____________________, LLC
Company Name
This LLC Operating Agreement (hereinafter referred to as the “Agreement”) is entered
into as of ________________, by and between _____________________, with a mailing
address of ______________________________________________________________
(hereinafter referred to as the “Member One”) and _____________________, with a
mailing address of ________________________________________________________
(hereinafter referred to as the “Member Two”), collectively referred to as the “Members,”
both of whom agree to be bound by this Agreement.
Article 1, The Limited Liability Company.
1.1. Formation. The Members have decided to form a limited liability company under
the name _____________________, LLC (hereinafter referred to as the “Company”) on
the terms and conditions in this Agreement and pursuant to the laws of the State of
_____________________ (hereinafter referred to as the “Act”).
State
The Members agree to file with the appropriate agency within the State of
_____________________ charged with processing and maintaining such records all
documentation required for the formation of the Company.
The rights and obligations of the parties are as provided in the Act except as otherwise
expressly provided in this Agreement.
1.2. Purpose. The purpose of the Company is to engage in any lawful act or activity for
which a Limited Liability Company may be formed within the State of
_____________________.
1.3. Office. The Company will maintain its principal business office within the State of
_____________________ at the following address:
________________________________________________________________________
1.4. Registered Agent. _____________________ is the Company's initial registered
agent in the State of _____________________, and the registered office is at the
following address:
________________________________________________________________________
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1.5. Term. The term of the Company commences on _____________________ and shall
continue perpetually unless sooner terminated as provided in this Agreement.
1.6. Names and Addresses of Members. ​ T he Members' names and addresses are
attached as Schedule 1 to this Agreement.
1.7. Admission of Additional Members. ​ E xcept as otherwise expressly provided in this
Agreement, no additional members may be admitted to the Company through issuance by
the company of a new interest in the Company without the prior unanimous written
consent of the Members.
Article 2, Capital Contributions.
2.1 Initial Contributions. ​ T he Members initially shall contribute to the Company capital
as described in Schedule 2 attached to this Agreement.
2.2. Additional Contributions. ​ N o Member shall be obligated to make any additional
contribution to the Company's capital without the prior unanimous written consent of the
Members.
2.3. No Interest on Capital Contributions. Members are not entitled to interest or other
compensation for or on account of their capital contributions to the Company except to
the extent, if any, expressly provided in this Agreement.
Article 3, Allocation of Profits and Losses.
3.1. Profits and Losses. ​ F or financial accounting and tax purposes, the Company's net
profits or net losses shall be determined on an annual basis and shall be allocated to the
Members in proportion to each Member's relative capital interest in the Company as set
forth in Schedule 2 as amended from time to time in accordance with the U.S.
Department of the Treasury Regulation 1.704-1.
3.2. Distributions. The Members shall determine and distribute available funds annually
or at more frequent intervals as they see fit. Available funds, as referred to herein, shall
mean the net cash of the Company available after appropriate provision for expenses and
liabilities, as determined by the Managers. Distributions in liquidation of the Company or
in the liquidation of a Member's interest shall be made in accordance with the positive
capital account balances pursuant to the U.S. Department of the Treasury Regulation
1.704.1(b)(2)(ii)(b)(2).
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To the extent a Member shall have a negative capital account balance, there shall be a
qualified income offset, as set forth in the U.S. Department of the Treasury Regulation
1.704.1(b)(2)(ii)(d).
3.3. No Right to Demand Return of Capital. No Member has any right to any return of
capital or other distribution except as expressly provided in this Agreement. No Member
has any drawing account in the Company.
Article 4, Indemnification.
The Company shall indemnify any person who was or is a party defendant or is
threatened to be made a party defendant, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a Member of the Company,
Manager, employee or agent of the Company, or is or was serving at the request of the
Company, against expenses (including attorney's fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred in connection with such action, suit or
proceeding if the Members determine that he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the Company, and with
respect to any criminal action proceeding, has no reasonable cause to believe his/her
conduct was unlawful.
Article 5, Powers and Duties of Managers.
5.1. Management of Company. ​ T he Members, within the authority granted by the Act
and the terms of this Agreement shall have the complete power and authority to manage
and operate the Company and make all decisions affecting its business and affairs.
Except as otherwise provided in this Agreement, all decisions and documents relating to
the management and operation of the Company shall be made and executed by a Majority
in Interest of the Members.
Third parties dealing with the Company shall be entitled to rely conclusively upon the
power and authority of a Majority in Interest of the Members to manage and operate the
business and affairs of the Company.
5.2. Decisions by Members. ​ W henever in this Agreement reference is made to the
decision, consent, approval, judgment, or action of the Members, unless otherwise
expressly provided in this Agreement, such decision, consent, approval, judgment, or
action shall mean a Majority of the Members.
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5.3. Withdrawal by a Member. A Member has no power to withdraw from the
Company, except as otherwise provided in Article 8.
Article 6, Salaries, Reimbursement, and Payment of Expenses.
6.1. Organization Expenses. ​ A ll expenses incurred in connection with the organization
of the Company will be paid by the Company.
6.2. Salary. ​ N o salary will be paid to a Member for the performance of his or her duties
under this Agreement unless the salary has been approved in writing by a majority of the
Members.
6.3. Legal and Accounting Services. ​ T he Company may obtain legal and accounting
services to the extent reasonably necessary for the conduct of the Company's business.
Article 7, Books of Account, Accounting Reports, Tax Returns, Fiscal Year
Banking.
7.1. Method of Accounting. The Company will use the method of accounting previously
determined by the Members for financial reporting and tax purposes.
7.2. Fiscal Year, Taxable Year. ​ T he fiscal year and the taxable year of the Company is
the calendar year.
7.3. Capital Accounts. ​ T he Company will maintain a Capital Account for each Member
on a cumulative basis in accordance with federal income tax accounting principles.
7.4. Banking. All funds of the Company will be deposited in a separate bank account or
in an account or accounts of a savings and loan association in the name of the Company
as determined by a majority of the Members. Company funds will be invested or
deposited with an institution, the accounts or deposits of which are insured or guaranteed
by an agency of the United States government.
Article 8, Transfer of Membership Interest.
8.1. Sale or Encumbrance Prohibited. ​ E xcept as otherwise permitted in this
Agreement, no Member may voluntarily or involuntarily transfer, sell, convey, encumber,
pledge, assign, or otherwise dispose of (hereinafter referred to as the “Transfer’) an
interest in the Company without the prior written consent of a majority of the other
non-transferring Members determined on a per capita basis.
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8.2. Right of First Refusal. Notwithstanding Article 8.1., a Member may transfer all or
any part of the Member's interest in the Company (hereinafter referred to as the
“Interest’) as follows:
A. The Member desiring to transfer his or her Interest first must provide written
notice (hereinafter referred to as the “Notice”) to the other Members, specifying
the price and terms on which the Member is prepared to sell the Interest
(hereinafter referred to as the “Offer”).
B. For a period of ___________ days after receipt of the Notice, the Members may
acquire all, but not less than all, of the Interest at the price and under the terms
specified in the Offer. If the other Members desiring to acquire the Interest cannot
agree among themselves on the allocation of the Interest among them, the
allocation will be proportional to the Ownership Interests of those Members
desiring to acquire the Interest.
C. Closing of the sale of the Interest will occur as stated in the Offer; provided,
however, that the closing will not be less than ___________ days after expiration
of the ___________-day notice period.
D. If the other Members fail or refuse to notify the transferring Member of their
desire to acquire all of the Interest proposed to be transferred within the
___________-day period following receipt of the Notice, then the Members will
be deemed to have waived their right to acquire the Interest on the terms described
in the Offer, and the transferring Member may sell and convey the Interest
consistent with the Offer to any other person or entity; provided, however, that
notwithstanding anything in Article 8.2 to the contrary, should the sale to a third
person be at a price or on terms that are more favorable to the purchaser than
stated in the Offer, then the transferring Member must reoffer the sale of the
Interest to the remaining Members at that other price or other terms; provided,
further, that if the sale to a third person is not closed within ___________ months
after the expiration of the ___________-day period describe above, then the
provisions of Article 8.2 will again apply to the Interest proposed to be sold or
conveyed.
E. Notwithstanding the foregoing provisions of Article 8.2, should the sole remaining
Member be entitled to and elect to acquire all the Interests of the other Members of
the Company in accordance with the provisions of Article 8.2, the acquiring
Member may assign the right to acquire the Interests to a spouse, lineal
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