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LLC Operating Agreement

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LIMITED LIABILITY COMPANY OPERATING AGREEMENT

FOR

THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the "Agreement") is entered into the day of , 20 , by and among the "Members" listed here:

Name of member:

Name of member:

Name of member:

Name of member:

Name of member:

Name of member:

Name of member:

Name of member:

Name of member:

Name of member:

In consideration of the mutual promises contained herein, the parties agree as follows:

ARTICLE 1: FORMATION OF THE COMPANY

1.01 Formation. The parties have formed a limited liability company under the name (the "LLC") upon the terms and conditions provided in this Agreement, subject to the provisions of the [state] Limited Liability Company Act, as amended (the "Act").

1.02 Articles of Organization. The Members acting through one of its Members, , filed Articles of Organization ("Articles") for record in the office of the Secretary of State of the State of ("Secretary of State"), on , thereby creating the LLC.

1.03 Business. The business of the LLC shall be to engage in any and all lawful business activities and other lawful actions in furtherance of said business.

1.04 Offices; Agents. The LLC's place of business shall be:

or such other place as the Members may select from time to time. The LLC's registered agent for service of process shall be , and the registered office of the LLC in [state] is:

1.05 Term. The LLC commenced on , the date the original Articles of Organization was filed in the Secretary of State's office, and will continue until dissolved as provided for in Article 9.

1.06 Fiscal/Tax Year. The LLC's fiscal and tax year shall end December 31.

ARTICLE 2: MEMBERS

2.01 Initial Members. The initial Members of the LLC are identified at Exhibit "A".

2.02 New Members. Other persons may become members only as set out in this Article 2.02.

ARTICLE 3: MANAGEMENT

3.01 Managers. The Members have delegated the responsibility for managing the LLC to Manager(s), subject to the limitations set out in Article 3.03.

3.02 Initial Managers. There shall be initial Managers. The initial Managers are:

Name of Initial Manager:

Name of Initial Manager:

Name of Initial Manager:

Name of Initial Manager:

3.03 Prohibited Actions. The Manager(s) cannot take certain actions without consent of a majority of the Members, including debt/expenditure limits over .

3.04 Compensation. The Manager(s) may receive reasonable compensation as agreed to by a majority of the Members.

ARTICLE 4: CONTRIBUTIONS PROFITS & LOSSES. AND DISTRIBUTIONS

4.01 Percentage Interests. Each Member's share shall be based on the Member's percentage interest in the LLC.

4.02 Initial Contributions. The initial contributions of the Members are as set out in Exhibit "A".

4.03 Additional Contributions. Additional cash contributions may be called by the Managers as necessary.

4.04 Record of Contributions/Percentage Interests. Exhibit "A" shall be updated to reflect subsequent contributions and assignments.

4.05 Profits and Losses. Profits, losses, and tax attributes shall be allocated on the basis of percentage interests.

4.06 Distributions. Distributions shall be made in the amounts and at the times determined by a majority of the Managers.

4.07 Change in Interests. A change in a Member's percentage interest shall be reflected in the year of change.

ARTICLE 5: VOTING; CONSENT TO ACTION

5.01 Voting by Members. Each Member shall be entitled to vote based on percentage interest owned.

5.02 Majority Required. Actions requiring member consent may be taken by majority vote unless unanimous consent is required.

5.03 Written Consent. Any required consent shall be evidenced by a writing signed by each consenting Member.

5.04 Meetings. Meetings shall be held as determined by the Managers or called by a majority of the Members.

ARTICLE 6: DISSOCIATION OF MEMBERS

6.01 Termination of Membership. A Member ceases to be a Member upon the occurrence of certain events, including withdrawal, assignment, death, incompetency, bankruptcy, or similar events.

6.02 Effect of Dissociation. A dissociated Member shall not be entitled to receive the fair value of his LLC interest solely by virtue of dissociation.

ARTICLE 7: RESTRICTIONS ON TRANSFERABILITY OF LLC INTEREST; SET PRICE FOR LLC INTEREST

7.01 LLC Interest. The LLC interest is personal property.

7.02 Encumbrance. A Member may encumber his LLC interest only with consent of a majority of the other Members.

7.03 Assignment. A Member may assign his LLC interest only as follows:

7.04 Set Price. The Set Price shall be fixed by consent of a majority of the Members and memorialized in LLC records. The initial Set Price shall be adjusted no later than .

ARTICLE 8: OBLIGATION TO SELL ON A DISSOCIATION EVENT CONCERNING A MEMBER

8.01 Dissociation. Upon a dissociation event, the LLC and remaining Members shall have the option to purchase the dissociated Member's interest at the Set Price.

ARTICLE 9: DISSOLUTION

9.01 Termination of LLC. The LLC will be dissolved only upon the written consent of a majority of the Members.

9.02 Final Distributions. Upon winding up, assets shall be distributed to creditors, then to Members for liabilities, and then to Members in proportion to interests.

ARTICLE 10: TAX MATTERS

10.01 Capital Accounts. Capital accounts shall be maintained consistent with Internal Revenue Code § 704.

10.02 Tax Matters Partner. The Members hereby designate as the tax matters member.

10.03 Partnership Election. The Members elect that the LLC be taxed as a partnership and not as a corporation.

ARTICLE 11: RECORDS AND INFORMATION

11.01 Records and Inspection. The LLC shall maintain required records and allow inspection at reasonable request.

11.02 Obtaining Additional Information. Members may obtain information regarding the business and tax returns upon reasonable demand.

ARTICLE 12: MISCELLANEOUS PROVISIONS

12.01 Amendment. Amendments require written approval by all Members.

12.02 Applicable Law. This Agreement shall be governed by the laws of the State of .

12.03 Pronouns, Etc. References to a Member or Manager shall include masculine, feminine, singular, plural, individuals, partnerships or corporations where applicable.

12.04 Counterparts. This instrument may be executed in any number of counterparts each of which shall be considered an original.

12.05 Specific Performance. Non-breaching Members shall be entitled to injunctive relief to enforce the Agreement.

12.06 Further Action. Each Member agrees to perform further acts and execute necessary documents.

12.07 Method of Notices. Notices shall be hand delivered or sent by registered or certified mail.

12.8 Computation of Time. Time shall be computed excluding the day of the act or event.

WHEREFORE, the parties have executed this Agreement on the dates stated below their signatures on the attached signature page for each individual party.

EXHIBIT “A”

MEMBERS – INITIAL CONTRIBUTION – PERCENTAGE INTEREST

- Name of Member - - Initial Contribution - - Percentage Interest -

INDIVIDUAL ACCEPTANCE AND SIGNATURE PAGE

I, , hereby certify that I have received a copy of the Limited Liability Company Operating Agreement and Articles of Organization of , a limited liability company.

I realize that an investment in this Company is speculative and involves substantial risk. I am aware and consent to the fact that the interests in the Company have not been registered under the Securities Act of 1933 or other Securities Acts.

I agree to be bound by all of the terms and conditions of the Articles of Organization and Limited Liability Company Operating Agreement of .

Signed:

Member

Date:

Type/Print Name:

Address:

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What an LLC Operating Agreement Is and Why It Matters

An LLC Operating Agreement is a private, written contract among an LLC’s members that defines ownership, capital contributions, profit and loss allocations, management structure, voting rules, transfer restrictions, and procedures for dissolution. Though most states do not require filing the agreement with the Secretary of State, a clear, signed Operating Agreement helps establish the LLC’s internal rules, protects limited liability by documenting company formalities, and provides evidence of agreed member expectations in disputes or tax reviews.

How a Well‑Drafted Operating Agreement Benefits Your LLC

A professional Operating Agreement reduces ambiguity, allocates decision‑making authority, documents capital and distributions, and sets exit and dissolution rules. It preserves limited liability by showing separation between members and the company and can prevent disputes and costly litigation.

How a Well‑Drafted Operating Agreement Benefits Your LLC

Who Typically Prepares and Signs an LLC Operating Agreement

The Operating Agreement is used by founders, members, managers, and advisors to document governance and financial arrangements from formation onward.

  • Single‑member LLCs and sole proprietors who want to document internal rules and banking evidence.
  • Multi‑member small businesses that need voting, capital, and profit allocation clarity among owners.
  • Professional firms and startups using manager‑managed structures or outside investors requiring defined governance.

Counsel, accountants, or experienced paralegals often review or prepare the agreement to ensure tax classification, compliance, and enforceability.

Step‑by‑Step: Completing the Operating Agreement

Follow these sequential steps to produce a signed, effective Operating Agreement that reflects member expectations and legal requirements.

  • 01
    Identify Parties: List every member and their ownership interest.
  • 02
    Define Capital: Record contributions, timing, and future funding obligations.
  • 03
    Set Governance: Choose member vs manager management and voting rules.
  • 04
    Execute Agreement: Have authorized signers sign and date all pages.

Core Sections to Include in a Professional Agreement

A comprehensive Operating Agreement organizes governance and economic terms so members and third parties can understand rights, duties, and remedies.

Membership

Identify each member, specify ownership percentages, admission procedures for new members, and any special classes of membership or units.

Capital Contributions

Detail initial and future contribution amounts, form of contribution, credit for services, and consequences for failure to contribute.

Allocations & Distributions

State how profits, losses, and tax items are allocated and when cash distributions occur, including priority or preferred returns if any.

Governance & Voting

Define management type, decision thresholds, meeting rules, committee powers, and emergency decision procedures.

Transfer Restrictions

Include right‑of‑first‑refusal, buy‑sell events, consent requirements, and permitted transfers to affiliates or family members.

Dissolution & Exit

Describe events triggering dissolution, winding up procedures, asset distribution waterfall, and dispute resolution methods.

Essential Information Fields to Complete

Entity Name: As filed with state
Principal Address: Street, city, state, ZIP
Member Names: Full legal names
Capital Details: Amounts and types
Management Type: Member or manager
Effective Date: MM/DD/YYYY

Common Preparation Mistakes to Avoid

  • Failing to specify capital contribution timing and remedies, which creates disputes over dilution and obligations.
  • Using vague voting thresholds or undefined quorum rules that stall decision making or invite litigation.
  • Omitting transfer restrictions or buy‑sell terms, making involuntary ownership changes likely and disruptive.
  • Not aligning tax classification with IRS filings, causing inconsistent reporting and potential penalties.

Legal and Financial Risks from an Incorrect Agreement

Loss of Limited Liability: Improper formalities can increase veil‑piercing risk.
Tax Misclassification: Incorrect filings trigger IRS penalties.
Member Disputes: Ambiguity leads to litigation and expense.
Enforceability Issues: Missing signatures or inconsistent terms may invalidate clauses.
Contractual Gaps: No buy‑sell terms increase sale complications.
Regulatory Noncompliance: Industry rules can add fines or revocation.

Where to Store and Share the Signed Agreement

The Operating Agreement is primarily an internal record. Use secure, auditable methods to distribute copies and capture signatures so members and third parties can verify authority.

  • Member Distribution: Provide each member a signed copy for their records.
  • Banking: Supply agreement to banks when opening accounts.
  • Accounting: Share with accountants for accurate tax classification.
  • Secure Archive: Store an executed copy with secure access controls.

Configuring an Online Operating Agreement Workflow

Set up your online workflow to match the agreement’s approval and signature requirements, and ensure audit logging and file format controls.

Field name and configuration settings Template name | Use entity name template and version control
Template selection and default values Conditional sections | Show manager fields only when manager‑managed selected
Signer authentication and verification Authentication | Email with SMS code or two‑factor for higher assurance
Export and document format options File format | Save executed copy as PDF/A for long‑term retention
Integration and storage destinations Integration | Sync signed file to NetSuite, Google Drive, or Box

Technical Considerations for eSigning and eStorage

Choose a platform that supports required authentication, audit trails, and secure export formats for legal records.

  • Supported file formats: PDF, DOCX, and PDF/A are commonly required
  • Authentication options: Email, SMS code, KBA, or enterprise SSO
  • Integration ecosystem: Connectors for Salesforce, Microsoft 365, NetSuite, and cloud storage

Ensure the chosen platform provides a verifiable audit trail, secure at‑rest encryption, and export options for long‑term retention and legal reproduction.

Key Timing Considerations and Filing Deadlines

Some timing events are legal or tax critical; record dates and filings promptly to avoid penalties or administrative friction.

Adopt Agreement:

Execute the Operating Agreement at formation or as soon as possible after Articles are filed

Obtain EIN:

Apply for an EIN from the IRS before opening bank accounts or filing employment taxes

Partnership Return Deadline:

If taxed as a partnership, Form 1065 is generally due March 15 each year (IRS)

Individual Tax Deadline:

Members report pass‑through income on Schedule K‑1 and their Form 1040 due April 15 unless extended

Update After Ownership Change:

Amend or restate the agreement promptly after member admissions, transfers, or withdrawals

Milestones from Formation to Execution

A typical sequence from formation through execution and recordkeeping includes these major milestones.

01

File Articles of Organization

File formation paperwork with the Secretary of State to create the LLC.

02

Adopt Operating Agreement

Draft and approve the Operating Agreement among members immediately after formation.

03

Obtain EIN and Open Bank Account

Obtain IRS EIN and open company bank account using the agreement as evidence.

04

Recordkeeping and Distribution

Distribute executed copies to members and store the signed agreement securely.

How an Operating Agreement Differs from Articles of Organization

Compare the Operating Agreement to the Articles to understand public filing vs internal governance functions.

Document Type Operating Agreement Articles of Organization
Filed with state?
Publicly accessible?
Primary purpose governance and member rights create legal existence of llc
Typical required? recommended required to form llc

Typical eSignature Vendor Comparison for Executing an Operating Agreement

Compare common vendor criteria when selecting an eSignature provider for legal documents. Pricing and capabilities vary by plan and billing model.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7‑day free trial, no credit card required Varies Varies Varies Varies
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently Asked Questions About LLC Operating Agreements

Answers to common practical and legal questions about drafting, executing, and updating an Operating Agreement.


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