Free California LLC Operating Agreement

Home » California LLC » Free California LLC Operating Agreement

Deal alert! Our favorite company, Northwest, is forming LLCs for $39 (60% off!) See details.

Every California LLC should have an Operating Agreement, but getting one doesn’t have to be expensive. You can download and customize your own Operating Agreement using our free template below.

California LLC Operating Agreement (Member-managed)

Here is a Member-managed Operating Agreement template available in 3 formats. This can be used for a Single-Member LLC or a Multi-Member LLC.

A Member-managed LLC is where all the Members (LLC owners) have the ability to legally bind the LLC in contracts and agreements. The LLC Members also run the business and day-to-day operations.

California LLC Operating Agreement (Manager-managed)

Here is a Manager-managed Operating Agreement template available in 2 formats. This can be used for a Single-Member LLC or a Multi-Member LLC.

A Manager-managed LLC is where one or more designated people (called Managers), have the ability to legally bind the LLC in contracts and agreements. The LLC Manager(s) also run the business and day-to-day operations.

The Members can't legally bind the LLC in contracts and agreements. They also don't take part in running the business and day-to-day operations. Instead, they take a passive/investor role.

However, the Members vote the Manager(s) into their position and are required to vote on certain things, like adding or removing an LLC Member.

Which one should I choose? It depends on how you want your LLC to be managed. Please see Member-managed vs Manager-managed LLC for more details. If you’re not sure which one to use, we recommend using the Member-managed Operating Agreement. This is the most common type of LLC management.

What is a California LLC Operating Agreement?

Operating Agreement

A California LLC Operating Agreement is a written contract between the LLC Members (LLC owners). This legal document includes detailed information about LLC ownership structure, who owns the company and how the LLC is managed.

Single-Member LLCs and Multi-Member LLCs should draft a customized LLC Operating Agreement, keep it with their business records, and give a copy to all Members.

What should be included in LLC Operating Agreements?

Basic Information

Your LLC Operating Agreement will include basic information about your Limited Liability Company. Some of the information will be the same as what is listed in your California LLC Articles of Organization. Operating Agreements should include:

Limited Liability Company Ownership

Your Operating Agreement will list all the LLC Members and how much of the Limited Liability Company they each own.

How much of the LLC someone owns is called their “LLC Membership Interest”.

LLC Membership Interest is most often expressed as a percentage (like 5%, 50%, 100%, etc.).

Note: Some people make the mistake of saying they are “shareholders” of an LLC. This isn’t accurate. The terms “shares” or “shareholders” do not exist when talking about LLCs. The term “shares” specifically refers to ownership in a Corporation.

Initial Capital Contributions (putting money into your LLC)

After your LLC is approved, you should open an LLC bank account and put money into that account.

Each of the LLC Members makes an initial capital contribution. Capital contribution simply means a deposit of money into the LLC bank account.

To learn more about capital contributions, like how much you should contribute, check out LLC Capital Contributions.

You will list the initial capital contributions in your LLC’s Operating Agreement.

Matt Horwitz, founder of LLC University®Pro tip: If you complete your Operating Agreement before you have opened an LLC bank account, just enter the amount the Members plan to deposit. If the amount of your deposit changes, it’s okay to edit your LLC Operating Agreement with the actual amounts later.

Statement about taxes

You will list how your LLC will be taxed in your California Operating Agreement. There are four common ways a Limited Liability Company can be taxed:

  • LLC taxed as a Sole Proprietorship
  • LLC taxed as a Partnership
  • LLC taxed as an S-Corporation
  • LLC taxed as a C-Corporation

Note: Husband and wife LLCs can sometimes be taxed as a Qualified Joint Venture LLC. To do this, the LLC must be formed in a community property state. California is a community property state, so your California LLC can choose to be taxed as a Qualified Joint Venture.

Voting Rights of LLC Members

The rules of membership voting will be spelled out in your California LLC’s Operating Agreement.

If you use the Member-managed Operating Agreement, the voting powers are proportionate to the LLC Membership Interest.

If you use the Manager-managed Operating Agreement, the voting powers are also proportionate to the LLC Membership Interest. Then the Members vote to elect one or more Managers. The Manager(s) then has authority to make certain decisions on behalf of the LLC (without needing a vote by the Members).

However, certain things, like adding or removing an LLC Member, require a vote of the Members (and the Manager has no say).

Make sure all LLC Members have a copy

Once you finalize your Operating Agreement, make sure all the Members have a copy.

We recommend keeping a copy of the Operating Agreement with your LLC business records.

Operating Agreement FAQs

As per the definition of “operating agreement” in Section 17701.02 of the California Limited Liability Company Act, an Operating Agreement isn’t required for an LLC in California.

But while it’s not required for a Limited Liability Company pursuant to California law in order to conduct business (and you don’t have to send a copy to the California Secretary of State), we strongly recommend having an Operating Agreement for your LLC.

Additionally, financial institutions (like banks) and other organizations may need to see a copy of this paperwork in order for you to do business with them.

It’s best to have an Operating Agreement, even if you are the sole Member of your California LLC (a Single-Member LLC).

If you go to court, an Operating Agreement helps prove that your Single-Member LLC is being run as a separate legal entity. This confirms the company’s limited liability status, and that is what protects your personal assets.

It’s best to have an Operating Agreement, especially for an LLC with multiple members (a Multi-Member LLC). This document will spell out ownership percentages, profit distribution, operating procedures / company operations, and management responsibilities.

If you go to court, an Operating Agreement helps prove that your Multi-member LLC is being run as a separate legal entity.

No, you don’t have to send your Operating Agreement to the California Secretary of State, or any other government agency. (That’s why there is no “filing fee” for an Operating Agreement.)

California LLC Operating Agreements are “internal documents” for business entities. Meaning, the Members just need to keep a copy with their business records.

The Operating Agreement is a legally binding document upon the LLC Members because of the Members’ signatures. It doesn’t need a government stamp of approval.

However, in the future, if your company were involved in a lawsuit or an audit, a court or government agency might ask to see a copy of your Operating Agreement.

Additionally, you may also need to show this document to:

  • financial institutions when you open a business bank account
  • financial institutions if you apply for a loan for the LLC
  • a title company if your LLC is buying real estate

No, your Operating Agreement doesn’t need to be notarized. Each Member just needs to sign it.

Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legal document.

Yes, but we recommend using an Operating Agreement template.

An Operating Agreement is a legal document. You don’t have to hire a lawyer to write one, though. Using a template helps make sure you cover everything you need to.

LLC University® offers free Operating Agreement templates that you can download. Using the free Operating Agreement template, you can customize it and write your own Limited Liability Company Operating Agreement.

If you wanted to write a simple California Operating Agreement without using a template, you could. You’d need to check with the California LLC Act to make sure it meets all the requirements.

For example, at a minimum, you’d want your California LLC name, your Registered Agent information, your business purpose, the names of the LLC Members, and information about initial capital contributions.

However, there is a lot more information that is important to document about your LLC.

It’s probably a lot easier to start with an existing template. We have a free LLC Operating Agreement template you can download on this page.

An LLC (Limited Liability Company) is a type of business structure. It’s a legal business entity that you form by filing a document called the Articles of Organization with the state.

An LLC Operating Agreement is an internal document that governs how your LLC is run. It contains rules about how much of the company each Member of the LLC owns, and other details about management and taxes.

Said another way, the LLC is your legal entity. And the Operating Agreement is a written set of rules for how the LLC will operate.

You could have an LLC without an Operating Agreement (but you shouldn’t). But you can’t have an Operating Agreement without an LLC.

Here are the steps to starting an LLC in California:

  1. Choose an LLC name and make sure it’s available
  2. Choose who will be your California Registered Agent
  3. File the California LLC Articles of Organization
  4. Complete and sign an LLC Operating Agreement
  5. Get an Employer Identification Number (EIN) from the Internal Revenue Service
  6. Submit your LLC Statement of Information
  7. Research business license requirements
  8. Open an LLC bank account

Matt Horwitz
Matt Horwitz
Founder & Educator, LLC University®
Matt Horwitz has been the leading expert on LLC education for the past decade. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC that other companies weren't offering. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
 
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.

14 comments on “California Operating Agreement”

Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

  1. First, thanks so much for sharing this information. It is truly appreciated. I have a question regarding completing the LLC-1 for a California LLC. Nowhere does it ask if this is a single or multi-member LLC. My intent is to form a single member LLC. Under number 4 on the LLC-1, you mentioned that we should check the box that states Management to be by…. “All LLC Members”; however, would I do this as well since I am wanting to be a single-member LLC?
    Last, I am wanting the LLC to be formed on December 18, 2017 and the code allows someone to request a specific date for filing as long as we are within 90-days of that date, which I am. How and where do I specify this? Perhaps on an attachment of some kind? I am doing this so I do not have to pay the $800 for 2017.
    Again, THANNKS!

    Reply
    • Hey Charles, thanks for the kind words! CA actually doesn’t ask about single-member vs. multi-member on the Articles of Organization, so no need to worry about it. And yes, you’d select “All LLC Members”, even though you are the only member (you’re still “all of them”). You can use a Future File Date Attachment to request a file date of January 1st of the following year. This will help you avoid the dreaded back-to-back annual franchise tax payments. You can also just wait until the 2nd half of December or early January to send your Articles of Organization to the state. And yes, you’re correct; the future file date can’t be more than 90 days forward. Hope that helps!

      Reply
    • Hi Len, apologies for the slow reply. No, this Operating Agreement doesn’t contain the additional provisions specific to a checkbook IRA/LLC. We have it on our roadmap though and it will be available in the near future. Thank you.

      Reply
  2. Do you have a Texas manager-managed LLC operating agreement template you can send over to me?

    Reply
    • Hey Mac, I just emailed it over to you. We’ll update this page soon so it’s available for download.

      Reply
  3. Hi Matt, thank you so much for creating this site. I’ve incorporated before but am in the process of doing it again so it’s very clear how much easier the process has been for me the second time around with the help of this amazing resource.

    My question is around the “Records” clause: I’m using a registered agent and have listed the registered agent’s address as my primary business address. The “records” clause in the template indicates that I am going to be storing these records at the primary business address. My business is a partnership with no physical location. I am planning on keeping my records both online in a shared Google Drive as well as hard copies at my primary residence. Would you recommend that I modify the “Records” clause to reflect this, or is this mostly a formality that people tend to ignore in the digital age?

    Reply
    • Hi Mike, you’re very welcome! That is wonderful to hear. I would modify the records clause to say exactly as you mentioned: records are kept on John Doe’s Google Drive account as well as stored physically at this address: 123 Main Street, Anytown, US 12345 (your primary residence). Hope that helps :)

      Reply
  4. Hi Matt, Thanks for the detailed explanations. I guess my question is more on where to file for LLC because i am expecting address changes soon. My situation is i am in California as of now but will be moving to Texas soon. if i were to file it in California for this year and then file it again in Texas next year. would that be advisable? What would be cost effective and lass hassled solution here?

    Reply
    • Hi Sagar, if possible, I’d recommend waiting. California is very aggressive when it comes to foreign LLC registration and taxation. Do you know approximately when you’ll move to Texas?

      Reply
  5. Hi Matt, thank you so much for all the information on your website. I am one step closer to my goal.

    Reply

Leave a comment or question

 Email me when I get a reply.

×