Every Michigan 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.
Michigan LLC Operating Agreement (Member-managed)
Michigan LLC Operating Agreement (Manager-managed)
What is a Michigan LLC Operating Agreement?
A Michigan 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 an 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 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 Michigan LLC Articles of Organization. Operating Agreements should include:
- LLC Name
- LLC effective date
- Michigan Registered Agent (if applicable)
- purpose of your LLC
- duration of your LLC
- and how your LLC will be taxed
Related Reading: Is a Registered Agent a Member of an LLC?
LLC 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.).
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.
You will list the initial capital contributions in your LLC’s Operating Agreement.
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 Operating Agreement with the actual amounts later.
- Related article: To learn more about capital contributions, like how much you should contribute, check out LLC Capital Contributions.
Statement about taxes
You will list how your LLC will be taxed in your Operating Agreement. There are four common ways an LLC 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
Voting Rights of LLC Members
The rules of membership voting will be spelled out in your Michigan 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
Is an Operating Agreement required for an LLC in Michigan?
As per the definition of “operating agreement” in Section 450-4102 of the Michigan LLC Act, an Operating Agreement isn’t required for an LLC in Michigan.
But while it’s not legally required in Michigan to conduct business, 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.
Why should an LLC with only one Member still have an Operating Agreement?
It’s best to have a written Operating Agreement, even if you are the only Member of your Michigan 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 (aka you’re not operating as a sole proprietor). And that protects your personal assets. Confirming the limited liability status of the company is especially important for a Single-Member LLC, and a Single Member Operating Agreement is the best way to do that.
Does a Multi-Member LLC need an Operating Agreement?
It’s best to have an Operating Agreement, especially for a Multi-Member LLC. This document will spell out ownership percentages, profit distribution, and management responsibilities.
A strong Operating Agreement is essential if your LLC has complex ownership agreements, or unusual ownership structure.
If you go to court, an Operating Agreement helps prove that your Multi-member LLC is being run as a separate legal entity. This is what protects you and your business partners from personal liability in a legal action.
Do I have to send my Operating Agreement to the state?
No, you don’t have to send your Operating Agreement to the Michigan Secretary of State, the Michigan Department of Licensing and Regulatory Affairs, or any other government agency. (That’s why there is no “filing fee” for an Operating Agreement.)
Operating Agreements are “internal documents”. Meaning, the Members just need to keep a copy with their business records.
The Michigan 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
Does my LLC Operating Agreement need to be notarized?
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 binding contract.
Can I write my own Operating Agreement?
Yes, but we recommend using a template to make a custom Operating Agreement.
An Operating Agreement is a legal document. You don’t have to hire an attorney to write one, unless you need legal advice. Using a template helps make sure you cover everything you need to.
LLC University® offers free Operating Agreement templates that you can download and customize to write your own LLC Operating Agreement.
How do you write a simple Operating Agreement?
If you wanted to write a simple Michigan Operating Agreement without using a template, you could. You’d need to check with the Michigan LLC Act to make sure it meets all the requirements.
For example, at a minimum, you’d want your Michigan 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.
What is the difference between an LLC and an Operating Agreement?
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 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.
How do I set up an LLC in Michigan?
Here are the steps to starting an LLC in Michigan:
- Choose an LLC name and make sure it’s available
- Choose who will be your Michigan Registered Agent
- File the Michigan LLC Articles of Organization
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the IRS
- Research business license requirements
- Open an LLC bank account
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.
Michigan LLC Guide
Looking for an overview? See Michigan LLC
Member managed Llc (vacation property) wants to have operating agreement. Must all equal members agree to terms & sign for it to be contractually legally binging?
Thank you!
Hi Sally, yes, all Members must agree and sign the Operating Agreement for it to be binding.
Thank you so much Matt. I appreciate your reply! One more thing… can LLC Registered Agent change Member Managed LLC to Manager Managed LLC naming himself as Agent & Manager to adopt legally binding Operating Agreement without all members approval?
You’re welcome Sally. A Registered Agent has no authority to do anything on behalf of the LLC. Only the Members (or Managers, if applicable) can. The power that a Member or Manager has is granted via the Operating Agreement, and state law.
But as your question is written (ignoring the Registered Agent part), no, someone can’t just change the existing LLC’s Operating Agreement and appoint themself a role, without all existing Members agreeing. Sounds like you might have a bit of a conflict on your hands. If necessary, it might be helpful to speak to an attorney or two if you (or others) are in a pickle.
Thanks again!
You are a life saver!! It’s so hard to navigate the business world as a newbie and a novice. Everything I search claims to be free but then isn’t or is way too expensive to “do it for me” when all I need is a sample form to edit – and you provided that along with super helpful explanations on how to fill it out. Such a relief. Thanks so much!
Hey Rebecca, thanks so much!! I know… what a drag some websites can be (argh!) We’re super happy to hear we could help :-)
Matt, just wanted to give a huge THANKS for all your content and resources! I was initially so overwhelmed by the thought of creating my LLC. But your website has been such a blessing and has given me the confidence and ability to push forward. Thanks again!
Hi Mike! You’re so welcome! LLCs can certainly feel daunting in the beginning. We’re so glad we could help :)
Holy Cow THANK YOU!!!!!!!! You saved me so much time and aggravation showing me how to fill out a simple manager LLC Op Agreement.
There should be more people like you in this world who give of themselves so generously!!
Thank you again!
Hey Dave! You’re very welcome. Thank you for the kind words!! We’re so glad we could help :)
Hi, so I’m thinking of adding a member to an LLC but don’t have an operating agreement. My LLC is a single member LLC.
Hi Abdol, when was your LLC formed? I’ll list out the steps in my next reply.
do I have to fill out the operating agreement document if it a soleproprietor LLC?
Hi Gabe, an LLC Operating Agreement isn’t required, however, we recommend completing one. Technically, it’s not called a Sole Proprietor LLC. It’s a Single-Member LLC that from a tax perspective, is taxed like a Sole Proprietorship. Hope that helps :)
Hi,
Is it possible for a person to be a member, but the other person (agent) pay the taxes? Thanks
Hi Susan, I don’t think so, but please check with an accountant as I’m not 100% sure.
Wow you are really a great person.
Thank you sooooo much!!!
You are very welcome! Thank you for the kind words :)