Download free Operating Agreement ↓
**Short Answer: Your Operating Agreement explains how the LLC will be managed, how taxes are paid, and how profits and losses are distributed. It’s basically the “rules” of your LLC.**
What is an Operating Agreement?
An Operating Agreement is an agreement for the member(s) of your LLC that sets forth how the LLC will be managed both financially and operationally.
Your Operating Agreement also spells out how much of the LLC each member owns.
You can have 1 member who owns 100%, you can have 2 members with a 50/50 split, 60/40, 70/30 (anything really!), or you can have 3 or more members and you can split the ownership any way you’d like.
The LLC is a flexible business structure. There is no limit on the number of members you can have. And, there are no restrictions on how you split the ownership of the company.
Unlike your LLC Formation Documents, the Operating Agreement does not need to be mailed anywhere.
You don’t need to mail it to the State.
You don’t need to mail it to the IRS.
It is strictly an “internal document”.
This means that you will just keep a copy with your other business documents.
Purpose of the Operating Agreement
Again, the purpose of the Operating Agreement is to spell out who the member(s) are and what percentage of the LLC they own, also known as their “membership interest”.
It also defines how the LLC is managed, how taxes are paid, and how profits and losses are distributed amongst the member(s).
Remember, your LLC can be owned by one person (called a Single-Member LLC) or your LLC can be owned by 2 or more people (called a Multi-Member LLC).
What You Need for Your Operating Agreement
In order to complete your Operating Agreement, you will need some basic information.
- The formation date of your LLC.
- The name and address of the Registered Office and Registered Agent.
- The general business purpose of the LLC.
- Member(s) percentages of ownership.
- Names of the Members and their addresses.
Your final Operating Agreement is not “set in stone”. You can make changes as needed.
Making Changes to your Operating Agreement
One of the benefits of forming an LLC is the flexibility of managing your business.
The Operating Agreement is a working document that is meant to be fluid and allow for changes as your business grows.
If you want to make simple changes (such as a change of address for a member or changing your Registered Office or Registered Agent), you’ll need to revise the original Operating Agreement.
If, however, you need to make complex changes (for example one member purchases the interests of another member, or you decide to raise financing with investors), it is best to hire an attorney. Making changes like these can have negative legal and tax consequences if done incorrectly.
Once all changes are made, you’ll need to print the new Operating Agreement and have all of the members sign it.
It is best practice to keep a copy of all versions of your Operating Agreement so you have a history of the changes that were made.
Who Needs Your Operating Agreement?
You may need to provide a copy of your Operating Agreement to:
- A lender if you are obtaining financing
- A title company if you are purchasing real estate
- Accounting and tax professionals for financial assistance
- Lawyers for legal advice
- Potential investors or partners who have an interest in your business
Operating Agreement Protects Your Assets
If you’re involved in a legal battle, the Court will likely ask for your LLC’s Operating Agreement.
Having one can help prove to the Court that you have a legitimate LLC and that you are running your business properly.
Download LLC Operating Agreement Template [Free]
None of the Secretary of States’ Offices provide an LLC Operating Agreement (except for Nevada).
However, you can download our free LLC Operating Agreement here:
How do I complete my LLC Operating Agreement?
Click the link below for step-by-step instructions:
LLC Operating Agreement instructions
Hope that helps!
47 comments on “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.
I’m a single member of ParentLLC, and ParentLLC is the single member of ChildLLC. I want to appoint myself as an officer (president, COO, etc.) in the ChildLLC so I can sign contracts on behalf of the company.
I understand how to add a clause to enable officers in the company, but I can’t find an example on how to actually appoint those officers by name in the operating agreement. Can you help me with this? Tnx!
Hi Tzvi, click on any state lesson on our website and take a look at the Manager-managed Operating Agreement template. That sounds like what you need… Your Child LLC to be a Manager-managed LLC (owned by the Parent LLC, but Managed by you). And here’s a document you can use to give yourself whatever titles you’d like: Addendum to Operating Agreement – LLC Officer Titles.
Yes! Exactly what I need. Thank you!
I realized a manager managed LLC is the more appropriate type.
Follow up question: can the cluase in the addendum be part of the operating agreement? Just to save papers and have everything in the same document.
Thanks again, Great website and service for LLC newbies:)
You’re very welcome :) Thank you very much! And definitely, you can just edit any Operating Agreement and add that – or similar – language to it.
Im looking for a LLC subscription agreement that talks about percentages. not stock/shares.
Im confused because online that is all I see. I thought you couldn’t have stock in an LLC.
Hi Dawn, you’re correct. The Operating Agreement template we provide doesn’t mention stock/shares. It uses the term LLC Membership Interest percentages.
Since an LLC is not a corporation, am i correct in presuming articles of incorporation do not have to be filed? If so, does the LLC operating agreement need to be changed to include the update of the tax situation?
Truly appreciate the work you have put into this website. Excellent information.
Hi MJ, thank you! Yes, you are correct. The Articles of Incorporation is not the correct form for an LLC. That’s the form for a Corporation. Depending on the state where the LLC is formed, the form is call the Articles of Organization, Certificate of Organization, or Certificate of Formation. Yes, it’s best practice to keep the LLC Operating Agreement up to date with any changes in tax classification. Hope that helps :)
Hello Matt, i have a question, i have already a fictitious name and was publish for 2 weeks before i applied for my LLC, should i wait for the LLC to come out, before applying for business license and
Commercial insurance ?
Thank you again
Hi Darwin, if you want to run your business through your LLC, then yes, you’ll want to wait for your LLC to be approved and then apply for your business license and get commercial insurance. And before doing that, you’ll want to get an EIN Number for your LLC. The reason why is that you want the business license and the commercial insurance in the name of your LLC. Your existing Fictitious Name sounds like it’s attached to you as a Sole Proprietorship. If you want your LLC to do business under that Fictions Name (in addition to the full legal name of the LLC), you can transfer/assign your existing Fictitious Name from yourself to your LLC. I believe you’re in California. If so, you’ll need to get in contact with the county office (where your principal place of business is located) for the form and instructions on how to transfer/assign your Fictitious Name from yourself to your LLC. Having said all that, if you’d like to share the name of your LLC and your Fictitious Name, we can offer some more context. Fictitious Names and LLCs often lead to a lot of confusion and people doing the wrong things/using them the wrong way. Hope that helps.
Hi Matt, just want to thank you for giving us your free education at LLC university, it helps me to understand a lot of stuff when starting a business. I should have found this before I wasted some money ..pls keep educating us..
thank you!!! More power
Darwin! Thanks for the awesome comment man! We sure do appreciate it and we certainly will :)
Hello, could you answer the question:
Is LLC Operating Agreement has to be notarize?
Thank you very much.
I would say yes. Because when I went to open my business bank account. They required that I have an operating agreement and they said that it needed to be notarized. In my case, the bank I work with was also able to notarize for me. I think many banks offer that service.
Also when I’m dealing with overseas contracts and things like opening a satellite office abroad. They always want a notarized organization agreement. So I would definitely assume that you should just go ahead and get it notarized. It doesn’t cost much and it doesn’t involve a lot of time and I think it would also protect you if you ever needed it for legal purposes.
But I am not proficient with these things and I can only share my experience. I hope it helps or that the professionals here can respond soon for you.
Hi Dana, thanks for sharing your experience. While we haven’t heard of a bank requesting a notarized LLC Operating Agreement, and most small business owners won’t need their Operating Agreement notarized, your experience has shown otherwise. This also shows that no two banks are exactly the same. Which bank did you open the account with? I’d say the takeaway for anyone reading this is to call the bank ahead of time and see what documents are required and ask if they need an LLC Operating Agreement (some banks don’t even need the Operating Agreement) and if so, whether or not it needs to be notarized. On a good note, if notarization is needed, most banks have a notary on staff. And we always recommend bringing all LLC paperwork to the bank anyway, just so you don’t have to make two trips. Thanks Dana!
Hi Galyna, as a general rule, an LLC Operating Agreement doesn’t need to be notarized to be effective and binding upon the LLC Members. Having said, Dana brought up a great point. So when in doubt, if you need to present your Operating Agreement somewhere, you can always ask them if it needs to be notarized… or you can always notarize it (since it’s relatively easy and affordable to get done) and it can’t hurt. Hope that helps.
Thank-you so much for all of your work and the knowledge you shared here for us. I was really in need of a detailed and easy explanation for this topic. I am part of a multi-member LLC and we needed this document to add to our application. And wow, you even had PDF available too !! you made things sooo easy for me. Thank-you !!
This has saved me hours of work. I will be sure to follow your other social media’s too.
Hi Dana, you’re very welcome! So glad to hear it was helpful and saved you a lot of time, too :)
Thanks for sharing ! Learning alot !
Do you have an the Manager-Managed LLC Operating Agreement template ?
My wife and I are about to file with the state of Oklahoma to have a LLC for s small transportation business. I am close to retiring from my current job and have done enough research to determine that after I retire I will be limited to about 1400 a month income to prevent reducing my social security supplement from my federal retirement. My first thought is to have the LLC in my wife’s name only and be an employee of the company but going that route will involve employer requirements on her part to include workmans comp insurance and quarterly reporting (taxes). We understand that this is necessary but are trying to figure out what is the best way to set this up not to exceed my income limits. what do you advise?
Hi David, this is an excellent question, but it falls outside of our wheelhouse. We’re not sure. You’ll want to seek some professional advice on this. Feel free to share any of your findings if you’d like. Thank you for your understanding.
Thank you for the prompt reply. Should the professional advice be with a CPA or a tax attorney?
You’re welcome David. I’d speak with both. I recommend speaking with a few people about the same scenario to make sure I get the best answer.
HI! What a wonderful site this is! Can I please have a template for the Manager-Managed Operating Agreement?
Also, for membership interest transfers (sale of member’s interest), do you think an LLC Bill of Sale is sufficient if it details the names of the members (old and new), the date of transfer, and the amount paid to transfer the interest to a new member?
Thanks so much!
Thank you Laima! We just emailed you the Manager-Managed LLC Operating Agreement. Regarding the second question, it’s best practice to speak with an attorney about how to properly sell/transfers LLC membership interest. Hope that helps and thanks for your understanding.
Thank you for what you are doing.
My question is: do you provide guidance for domesticating an LLC from Delaware to Florida?
You’re welcome Scott. At this point, we don’t have content written on domestication. It’s on our list, just not the top priority at this time. However, for domesticating a DE LLC into a FL LLC, you’ll file Articles of Conversion For “Other Business Entity” into Florida Limited Liability Company. The form includes the conversion as well as the Florida Articles of Organization. This can only be filed by mail. No online filing for this at this time. Approval time is currently 7 to 10 business days. After domestication is approved, you can dissolve Delaware LLC and wind up its affairs. Hope that helps.
Thank you for that information. But when I called the State of Florida to confirm, they told me to file Article of Conversion and Article of Organization and no Delaware Certificate of Status is required. They said that Domestication is only requierd if the LLC is from out of the country.
I wonder if this make sense to you?
Hi Scott, my first reply was incorrect. I’ve since edited it to help future readers. You were told correct. No Delaware Certificate of Status is needed and the correct form is called the “Articles of Conversion For ‘Other Business Entity’ into Florida Limited Liability Company”. Thanks for helping us square things up :)
Your website is fantastic and very informative. I’m planning to create a FL LLC and it has helped me understand the details and trade-offs. Do you have a template for a Manager-Managed LLC Operating Agreement? If not, what should I be thinking about changing in the Member-Managed Operating Agreement?
Hey Scotty, thanks for the kind words! I just emailed you the Manager-Managed Operating Agreement. Hope that helps :)
Can I get the Manager-managed version as well? I’ll own 75% of the LLC with 2 other members splitting the other 25%. But I will be appointed as the sole, internal manager. Thanks
Hey Jeremy, I just emailed it over to you. Hope that helps.
Your website has been super helpful. Have learned a lot (like that I might as well form in California if I am going to do business there). Sorry to bother, but could I get a copy of the managed member operating agreement as well.
Thanks so much. Really appreciate it.
Hey Will! Thanks so much! Glad to hear we could help. Check out our updated California LLC Operating Agreement page. We now have Member-managed and Manager-managed Operating Agreement templates for download. Hope that helps.
Hi, Matt!!! First off, I have to say that I’m really excited to have found LLC University and I look forward to really making the most out of all this knowledge.
My question is, considering that the OA is a living document, I thought about making the LLC member-managed, considering that I’m the only member at the moment, but I do plan on expanding the membership soon, regardless of any reason for such expansion.
Should I play it safe and be a managing member on the OA, or am I simply getting ahead of myself?
Thank you so much!
Emmanuel, what’s up!! Thanks so much. We’re glad you are finding it so helpful :) In a Member-Managed LLC, your title is actually Managing Member. It means you are a Member (owner) and that you have the authority to act on behalf of the LLC and bind the LLC in contracts and agreements.
Just a heads up: adding Members is not a straightforward process. You’ll fist need to transfer/sell some of your LLC membership interest to the new person(s). This can be done via an Assignment of LLC Membership Interest. Then you’ll need to amend the Operating Agreement. Depending on the state (if Members are publicly listed), you may need to amend your Articles of Organization, Certificate of Organization, or Certificate of Formation. Then you’ll need to file Form 8832 with the IRS and tell them to tax your LLC as a Partnership (your LLC will switch from an LLC taxed as a Sole Proprietorship to an LLC taxed as a Partnership once you add at lease one new Member). You’ll also need to update the Department of Revenue (or equivalent agency in your state) and your bank. Hope that helps!
Hello I’m forming, my LLC by myself is more than 120 day already to publish an add in the news paper, do you think i can still do it? I don’t know if the state will acept it,
Hi Antony, yes, you can still do it. It’s never too late. Essentially your New York LLC is “not in compliance”. Once you meet the New York LLC publication requirements, your LLC will then be compliant. Hope that helps.
Do you have an example of a Membership Certificate?
Hi Stephen, we don’t have LLC Membership Certificates available yet, but we will soon. I just emailed you a couple examples. Hope that helps.
Hi Matt- I am so happy I have found your site. I am the mom of a now, 22 yr. old actor. We used to have a CA corp. which I started for my son as a loan-out when he was a minor then shifted all to him (all officers and sole shareholder) when he turned 18 but I still ran the business and it was my signature and credit that got our banking/ credit cards etc. Two yrs. ago, due to little income, we dissolved the corp. NOW- he is starting an LLC but as his business manager I am the one doing all the books, staring LLC etc. I am just REALLY confused about member/manager. we want this to be a single member (him) and I do not want to be financially involved or a member at all but I will still be the ONE running all business matters. Do I need to be a “manager” or can we just spell this out in OA? I already have Power of Attorney for ALL of his business affairs. Thank you SO much for your great, clear info!
Hi Samantha, thank you for the kind words. And I’m glad that our website has been so helpful. Before getting into the Manager-managed vs. Member-managed topic, let me just add a note regarding being the LLC Organizer and keep your documentation in order. Because you are the one forming the LLC for your son, you will be the LLC’s Organizer and will sign the California Articles of Organization. Your son’s name will not be listed on the Articles of Organization, since California does not ask for the Member’s information on this form. So after you sign as Organizer and the LLC is approved, you can then sign a Statement of LLC Organizer in Lieu of Organization Meeting, stepping down as the LLC Organizer and appointing your son as the Member. Also, your son should sign an LLC Operating Agreement. As far as Manager-managed vs. Member-managed, I think you could go either way. You could elect to have the LLC be Manager-managed on the Articles of Organization. Then sign a Manager-managed Operating Agreement where your son appoints you as Manager. After that, you are the only one who has authority to bind the LLC into contracts and agreements. Said another way, you’ll be the only one who can act on behalf of the LLC. Your son, being the Member though, has the power to remove you as Manager, since he’s the only Member (and doesn’t need the consent of any other Members, since there aren’t any). I think an easier option though, is just form a Member-managed LLC where you son is known as the Managing Member. He has full authority and the right to bind the LLC into contracts and agreement. However, you can simply be a “consultant” or independent contractor and you do as you already are doing. Overseeing and managing until your son has enough experience and maturity to take things over himself. You could have an agreement like this in place verbally, but it’s better to spell it out in writing. And you could add that language to the LLC’s Operating Agreement. Hope that helps offer some more clarity.
Thanks again Matt!
I had to read your info over a few times but I think I get it. already sent in the Articles of Org. as organizer so if I like it or not, we are off and running. Will relinquish and follow-through as you suggest .
HAPPY NEW YEAR!
A lot of this stuff requires reading it a few times lol ;) Glad to hear you got everything going. Thank you and Happy 2018!!
I recently started a Home Improvement Contracting business in Maryland. I registered the business as an LLC and I am currently the single owner/agent. This business was started with the idea of having my son who is 29 years old participate, initially as a sub-contractor (1099) and eventually as a named partner. I also will likely have my wife participating in some capacity (record keeping, etc.), but initially I don’t plan on having employees. I currently have a full time job, but will work this in the evenings and on weekends until I retire sometime over the next 3-5 years. My son has been doing this type of work with other companies and has always been a 1099 sub-contractor. The focus of the business is on storm damage repair of roofing, siding, gutters, etc. The majority of our work will be covered by insurance claims and we will work with the customer and insurance agent to maximize the claim and get the customer what they are entitled to. The actual work to replace the roofing, etc., will be done by our sub-contractors.
I would like to prepare an Operating Agreement, but I’m not sure how best to describe the working arrrangement. Is what I described above adequate or do you have other suggestions?
Hi Pete, thanks for writing in. Unfortunately, this kind of question requires legal advice and we do not provide those services. The inner workings of your business and the day-to-day operations is a “sit down” conversation that might take a little while. Apologies I could not be more specific, but do check out Avvo (https://www.avvo.com/) for local assistance. Hope that helps.