Michigan LLC Operating Agreement

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Michigan 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.

Michigan 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 Michigan LLC Operating Agreement?

Operating AgreementA Michigan LLC Operating Agreement is a written contract between the LLC Members (LLC owners). This legal document includes detailed information about LLC ownership 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.

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 Ownership (“LLC Membership Interest”)

Your Operating Agreement will list all the LLC Members and how much of the LLC 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 Operating Agreement later with the actual amounts.

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

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. Michigan is not a community property state.

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 a Manager or 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 Members have a copy.

And keep a copy of the Operating Agreement with your LLC business records.

Operating Agreement FAQs

It’s best to have an 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.

It’s best to have an Operating Agreement, especially for a Multi-Member LLC. The Operating Agreement will spell out ownership percentages, profit distribution, and management responsibilities.

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

While it’s not a state requirement in Michigan, we strongly recommend having an Operating Agreement for your LLC.

Additionally, banks and other organizations may need to see a copy of your Operating Agreement in order to do business with them.

No, you don’t have to send your Operating Agreement to the Secretary of State, the Michigan Department of Licensing and Regulatory Affairs (LARA), or any other government agency.

Operating Agreements are “internal documents”. 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 you 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 your Michigan LLC Operating Agreement to:

  • a bank when you open a business bank account
  • a lender 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 the Operating Agreement.

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

Next Step: EIN Number from IRS

After you’ve completed and signed your Michigan Operating Agreement, you can then proceed to the next Lesson: Michigan LLC EIN Number.

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.

10 comments on “Michigan LLC 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. Hi,
    Is it possible for a person to be a member, but the other person (agent) pay the taxes? Thanks

    Reply
    • 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 :)

      Reply
  2. 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.

    Reply
    • Hi Abdol, when was your LLC formed? I’ll list out the steps in my next reply.

      Reply
  3. 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!

    Reply
    • Hey Dave! You’re very welcome. Thank you for the kind words!! We’re so glad we could help :)

      Reply

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Matt Horwitz founder of LLC University
Matt Horwitz
Founder & Educator
LLC University®