Free LLC Operating Agreement Template

What an Operating Agreement Is and Why LLCs Need One

An LLC operating agreement is the internal governing document for a limited liability company. It defines the ownership structure, management rules, financial arrangements, and procedures for major events like adding new members or dissolving the company. The agreement is between the LLC's members (owners) and is not filed with the state; it is kept internally.

Most states do not require an operating agreement by law, but having one is strongly advisable for any LLC. Without an operating agreement, the LLC's operations are governed entirely by the default rules of state LLC law, which may not reflect what the members actually want. A written agreement also protects the LLC's liability protection by demonstrating that the company is a separate legal entity being operated as such.

• Single-member LLCs: even without co-owners, an operating agreement establishes the separation between the owner and the business for liability and tax purposes
• Multi-member LLCs: an operating agreement is essential to define each member's ownership share, voting rights, and financial entitlements before disputes arise
• LLCs with outside investors: investors typically require an operating agreement before committing capital
• LLCs opening bank accounts: most banks require an operating agreement to open a business checking account
• LLCs in states like California, Delaware, Maine, Missouri, and New York where operating agreements are legally required

Key Clauses in an LLC Operating Agreement

A well-written operating agreement covers the full lifecycle of the LLC, from formation to dissolution. The following provisions are the most important to include and customize for your specific situation.

• Ownership percentages: each member's ownership interest expressed as a percentage that totals 100 percent
• Capital contributions: how much each member contributed to start the LLC (cash, property, or services) and the value assigned to non-cash contributions
• Management structure: whether the LLC is member-managed (all members run the business) or manager-managed (designated managers run day-to-day operations)
• Voting rights and thresholds: what percentage of ownership is required to approve major decisions (admitting new members, taking on debt, selling the company)
• Profit and loss allocation: how profits and losses are divided among members, which may be proportional to ownership or structured differently by written agreement
• Distribution policy: when and how profits are paid out to members
• Transfer restrictions: whether members can sell or transfer their ownership interest and what approval is required from other members
• Buy-sell provisions: what happens to a member's interest if they die, become incapacitated, go through a divorce, or want to leave the LLC
• Dissolution procedures: how the LLC is wound down and how remaining assets are distributed

How to Complete an LLC Operating Agreement Template

Completing an operating agreement requires decisions about management structure and financial arrangements before you start filling in the form. Having those decisions made in advance prevents gaps that can cause problems later.

1. Enter the LLC's full legal name, the state of formation, the principal office address, and the registered agent's name and address.
2. List all members with their full legal names and ownership percentages. Double-check that the percentages add up to exactly 100 percent.
3. Choose a management structure: member-managed if the owners will run the company themselves, or manager-managed if you are designating one or more managers (who may or may not be members).
4. Record each member's initial capital contribution: the cash, property, or services they contributed to start the LLC and any agreed value for non-cash contributions.
5. Decide on profit and loss allocation and distribution rules. The default is proportional to ownership; if you want a different arrangement, state it explicitly.
6. Add transfer restrictions and any right-of-first-refusal provision, which gives existing members the right to purchase a departing member's interest before it can be sold to an outsider.
7. Include buy-sell provisions for the events most likely to affect your LLC: death, disability, voluntary departure, and divorce.
8. Have all members sign and date the agreement. Keep a copy in the LLC's records. Update the agreement whenever ownership or management structure changes.

LLC Operating Agreement vs. Partnership Agreement vs. Corporate Bylaws

Different business entity types use different governing documents. Choosing the right template means matching the document type to the entity type.

• LLC operating agreement: governs a limited liability company; addresses member ownership, management, and distributions
• Partnership agreement template: governs a general partnership or limited partnership; covers partner roles, profit sharing, and decision-making
• Corporate bylaws template: governs a corporation (C corp or S corp); covers board of directors, shareholder meetings, officer roles, and corporate procedures
• Shareholder agreement template: a separate document that governs relationships between corporate shareholders, often covering buyout rights and transfer restrictions
• Corporate resolution template: a formal written decision by a corporation's board of directors authorizing a specific action (opening a bank account, taking on a loan)

Single-Member LLC Operating Agreement

A single-member LLC operating agreement is simpler than a multi-member version because there are no co-owner relationships to define, but it is still worth having in writing. The primary purposes of a single-member operating agreement are to establish that the LLC is separate from the owner, to define how the owner takes distributions, and to specify what happens to the LLC if the owner dies or becomes incapacitated.

Many banks require a single-member operating agreement to open a business account. Some lenders and landlords also ask for it before entering into agreements with the LLC. A well-maintained operating agreement supports the LLC's liability protection by demonstrating that the owner treats the LLC as a distinct legal entity.

• Confirm the LLC's formation date, state, principal address, and registered agent
• State that there is one member and list the owner's full legal name
• Specify that the owner holds 100 percent of the membership interest
• Describe how the owner will take distributions (salary, draws, or as-needed distributions)
• Include a succession provision specifying what happens to the LLC if the owner dies

Legal Disclaimer

This operating agreement template is provided for general informational purposes only and does not constitute legal advice. LLC laws vary significantly by state, and the requirements for a valid operating agreement, the default rules that apply without one, and the specific provisions needed for your business structure all depend on your state's LLC act and your particular circumstances. This template has not been reviewed for compliance with the laws of any specific state. Before relying on any operating agreement for your LLC, consult a licensed business attorney in your state. GetTemplated is not a law firm, and use of this template does not create an attorney-client relationship.