Do You Need an Operating Agreement?

An operating agreement is the contract between an LLC and its owners. It isn't filed with the state and nobody checks whether you have one on the day you form. That is exactly why so many LLCs skip it, and why the gap tends to surface at a bad moment: opening a bank account, bringing in a partner, or sorting out what happens when an owner wants to leave.

What an operating agreement covers

• Ownership: who the members are and what percentage each owns.
• Contributions: what each member put in, whether money, property, or work.
• Profits and losses: how they are allocated and when money can be taken out.
• Management: member-managed or manager-managed, who can sign contracts, and which decisions need a vote.
• Banking: who can open accounts and sign checks.
• Transfers: whether a member can sell their share, and whether the others get first refusal.
• Exits: what happens if a member leaves, dies, divorces, or is bought out, and how the share is valued.
• Dissolution: how the company winds down and who gets what.

Without an agreement, your state's LLC statute fills in the blanks with default rules. Those defaults may not match what you and your co-owners assumed, such as profits split equally regardless of who invested what.

Is it legally required?

In most states, no. A few states require LLCs to have one, and New York sets a deadline: adopt a written operating agreement (not filed), within 90 days after filing the Articles. Even where it is not required, "not required by the state" and "not needed" are different things.

Who needs one most

Multi-member LLCs

If you have co-owners, treat the operating agreement as essential. It is the document that settles disputes before they start: who decides, who gets paid, and what happens when someone wants out. Writing it while everyone gets along is far easier than writing it during an argument.

Single-member LLCs

A one-owner agreement is short, but it does real work. It shows the LLC is run as a separate business, which can help support the liability protection you formed it for. It names who takes over if you die or become incapacitated. And it answers the bank's question about who has authority to act for the company.

Why banks ask for it

The state's records show that your LLC exists. They usually don't show who owns it or who may act for it. Banks need both under federal customer-identification rules, so many ask for the operating agreement when you open a business account, especially for multi-member LLCs. Lenders, landlords, and buyers of the business may ask too.

Ways to get one

Write it yourself

For a single-member LLC or a simple equal partnership, a careful owner can write a workable agreement using a reputable template. Read every clause; a template you don't understand is worse than a short one you do.

Use a self-help template service

Our $79 add-on drafts an agreement from the answers in your order, available from your order page after checkout. Single-member agreements arrive complete; multi-member agreements include a member schedule your members finish when they sign. It is a self-help document, not legal advice. Because of California and North Carolina's rules on legal document preparation, we don't offer it to customers forming in, or located in, those states.

Hire an attorney

Worth it when ownership is unequal or tied to future work, when there are investors or vesting, when the members have different roles and different risk, or when the business holds real estate or valuable intellectual property. Those agreements need negotiation, not a form.

Signing and keeping it

• Every member signs and dates it; keep a signed copy with the company records.
• Match it to your formation filing: the same name, state, and management type.
• Update it when ownership changes, and have all members sign the amendment.
• Don't file it with the state unless the state specifically asks for it.

File it yourself or have us do it

The operating agreement comes after the LLC exists, so the first task is the formation filing. You can file directly with your state for the state fee alone, or have us file it for $99 plus the state fee. For the full sequence, see How to start an LLC, and for a shorter read, our primer on operating agreements.

General information, not legal advice.