Is an operating agreement required for an LLC?

Most states do not require a written operating agreement to form an LLC, but having one documents member rights, reduces disputes, and supports bank and tax processes. For enforceability and clarity, execute and retain signed copies; consider state-specific requirements.

Can I electronically sign the operating agreement?

Yes. Electronic signatures are enforceable under the ESIGN Act (15 U.S.C. §7001) and UETA when the parties consent and the record is retained. Ensure the e-signature method captures intent, attribution, and an audit trail; use enhanced authentication for higher-risk transactions.

Who must sign the Memorandum and Operating Agreement?

All initial members and any designated managers should sign to evidence consent. If an organizer signs on behalf of members, include written authority. Follow any state rules about notary or witness lines and record each signer’s capacity.

Do I need a notary or witnesses for execution?

Most states do not require notarization for an operating agreement, but some instruments connected to the LLC (such as real estate deeds) may require notarization or witnesses. Notarizing can simplify later transactions; confirm state-specific rules.

How do I amend the agreement properly?

Follow the amendment procedure set out in the agreement: provide required notice, obtain the necessary voting percentages, draft a written amendment, and have authorized signatories execute and date it. Attach the amendment to records and distribute updated copies.

How long must I keep signed records?

Retain the signed operating agreement for the agreement term plus a conservatively long post-termination period. IRS-related records should be kept at least three years (IRC §6501(a)); HIPAA-covered documents require six years (45 CFR §164.530(j)). Check state variations.

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Memorandum of Organization and Operating Agreement

Memorandum of Organization and Operating Agreement

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What the Memorandum of Organization and Operating Agreement Is

The Memorandum of Organization and Operating Agreement is a combined LLC formation and internal governance document used to create a limited liability company and set its operating rules. It typically records the company’s legal name, formation date, registered agent, member identities, capital contributions, membership interests, management structure, voting rights, distribution rules, and procedures for admission, withdrawal, dissolution, and amendment. When filed or retained with state Articles of Organization, it clarifies internal rights and responsibilities and serves as primary evidence of the LLC’s agreed governance for banks, tax authorities, and courts.

Why a Combined Memorandum and Operating Agreement Matters

Use this Memorandum of Organization and Operating Agreement to establish binding governance, reduce member disputes, and document capital and voting arrangements. Electronic execution is enforceable under the ESIGN Act (15 U.S.C. §7001) and UETA when consent and retention requirements are met.

Who Typically Prepares and Signs This Document

Typical users include organizers, founding members, designated managers, registered agents, and outside counsel who handle LLC formation and governance.

Organizers and initial members: prepare formation details and member contribution terms.
Managers and officers: implement governance, voting procedures, and cash distribution policies.
Attorneys and accountants: review compliance, tax classification, and dispute-avoidance provisions.

Core Sections to Include in the Agreement

Core sections define member roles, capital commitments, profit allocations, management authority, transfer restrictions, dispute resolution, and procedures for amendment and dissolution.

Member Rights

Specify each member’s ownership percentage, capital contribution, profit and loss allocation, voting thresholds, and reserved rights. Clear allocation avoids taxation ambiguities and supports lender or investor due diligence.

Management

Describe whether the LLC is member-managed or manager-managed, list manager powers, appointment and removal processes, quorum rules, decision thresholds for major transactions, and emergency decision processes and delegated authorities.

Capital

Document initial capital contributions, promised future contributions, valuation methods, classes of membership interests, and procedures for additional funding or capital calls to prevent dilution disputes.

Transfers

Set transfer restrictions, right of first refusal, buy-sell triggers, and required consents. Specify permitted transfers to affiliates, assignments for collateral, and procedures for involuntary transfers.

Dissolution

Outline dissolution events, winding-up steps, creditor priority, distribution waterfall, and member approval thresholds for voluntary and involuntary liquidation scenarios. Include ballot mechanics and timelines for winding procedures to meet state filing and tax obligations.

Amendments

Specify how the agreement may be amended, required notice, voting percentages, effective dates for amendments, and recordkeeping obligations for updated execution copies and filing recommendations for state or bank records.

Step-by-Step: Prepare and Execute the Agreement

Follow these sequential steps to prepare, execute, and preserve the Memorandum of Organization and Operating Agreement for an LLC.

01

Gather Information: Collect names, addresses, EIN, and capital details.
02

Draft Agreement: Define roles, contributions, distributions, and transfer rules.
03

Execute Signatures: All members sign with dates; notarize if state requires.
04

File & Store: File Articles if required; keep signed originals and copies.

Setting Up an Online Signing Workflow

Set up an online completion workflow for secure signing, automated routing, and record retention before sending the agreement to signers.

Document Workflow Field and Configuration	Configuration for online completion and routing
Signer Authentication Options and Strength	Email link, SMS code, or KBA
Conditional Fields and Visibility Rules	Show capital fields only after contributions entered
Automatic Reminders and Expiry Settings	Schedule reminder cadence and set link expiration days
Document Retention and Audit Trail Settings	Enable audit trail, PDF certificate, and retention policies

Typical eSigning and Post-Signing Flow

Typical submission flow for e-execution and post-signing processing of the Memorandum and Operating Agreement with retained audit records.

Upload Document: Prepare final PDF or DOCX for signing
Place Fields: Add signature, name, date, and initial fields
Choose Signers: Add emails, set signing order, and authenticate
Complete Audit: Capture timestamps, IPs, and certificate of completion

Technical Considerations for Digital Execution

For eSigning and eSubmission, choose a platform that supports compliance, secure storage, and required authentication levels.

File Formats: PDF and DOCX supported
Integrations: Connectors for NetSuite and Google Workspace
Security: AES-256 at rest, TLS 1.2/1.3 in transit

Key Filing and Internal Deadlines to Track

Key filing and internal deadlines related to forming an LLC and maintaining its operating agreement.

File Articles of Organization with State:

File within state-specified timeframe; varies by state

Select Operating Agreement Effective Date:

Enter as MM/DD/YYYY; determines tax classification start

Apply for Employer Identification Number (EIN):

Apply to IRS when opening bank accounts or hiring employees

Record Initial Member Capital Contributions:

Record amounts and dates; affects ownership and tax basis

File Annual Report and Pay State Fees:

Deadlines vary by state; missing filings risk penalties and dissolution

Common Preparation Mistakes to Avoid

Unclear ownership percentages or undocumented capital contributions lead to disputes and potential tax recharacterizations; document amounts, dates, and valuation method to prevent disagreements.
Using vague management language, such as 'reasonable discretion', can create ambiguity in authority; define manager powers, limits, and approval thresholds for major transactions.
Failing to update the agreement after member changes causes bank, tax, and legal complications; include procedures for admission, transfer, and withdrawal and record executed amendments promptly.
Neglecting to preserve signed originals, audit trails, or consent disclosures for electronic signatures can undermine enforceability; ensure retention policies meet ESIGN and UETA requirements.

Consequences of an Incorrect or Incomplete Agreement

Piercing Risk: Increased personal liability

Tax Misclassification: Unfavorable IRS treatment

State Penalties: Late filing fines, administrative dissolution

Contract Disputes: Ambiguous terms invite litigation

Banking Delays: Unable to open accounts promptly

Invalid Signatures: Missing consent or retention

Essential Information to Include on the Form

Company Legal Name: Exact name as filed with state

Organizer Name(s): Full legal names of organizers

Registered Agent: Agent name and physical address

Principal Office Address: Street, city, state, ZIP

Capital Contributions: Dollar amounts and contribution dates

Management Type: Member-managed or manager-managed

Supporting Documents to Attach or Retain

Common supporting documents and exhibits to attach to the Memorandum and Operating Agreement improve clarity and provide evidentiary backup for member rights and state filings.

Articles of Org

Attach the filed Articles of Organization (or Certificate of Formation) to show state filing details, file number, and official effective date. This supports bank account setup and legal proof of existence.

EIN Letter

Include IRS Form CP575 or other EIN issuance confirmation to document tax ID used for banking, payroll, and tax filings. Record the EIN date and responsible party.

Member Resolutions

Attach resolutions approving admission of members, loans, capital transfers, or major contracts. Resolutions provide contemporaneous evidence of member consent and authority for transactions.

Exhibits

Include exhibits such as member schedules, intellectual property assignments, real estate lists, or promissory notes referenced in the main agreement to preserve clarity and enforceability.

eSignature Pricing and Feature Comparison for Agreement Execution

Pricing overview for commonly used eSignature vendors and feature availability relevant to signing LLC formation documents.

	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	Yes, 7-day trial	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
Envelope Cap	No cap	100 envelopes/user/yr	Varies	Varies	Varies

Frequently Asked Questions About the Memorandum and Operating Agreement

Answers to common questions about completing, signing, filing, and preserving the Memorandum of Organization and Operating Agreement for U.S. LLCs.

Need help? Contact support

Is an operating agreement required for an LLC?
Most states do not require a written operating agreement to form an LLC, but having one documents member rights, reduces disputes, and supports bank and tax processes. For enforceability and clarity, execute and retain signed copies; consider state-specific requirements.
Can I electronically sign the operating agreement?
Yes. Electronic signatures are enforceable under the ESIGN Act (15 U.S.C. §7001) and UETA when the parties consent and the record is retained. Ensure the e-signature method captures intent, attribution, and an audit trail; use enhanced authentication for higher-risk transactions.
Who must sign the Memorandum and Operating Agreement?
All initial members and any designated managers should sign to evidence consent. If an organizer signs on behalf of members, include written authority. Follow any state rules about notary or witness lines and record each signer’s capacity.
Do I need a notary or witnesses for execution?
Most states do not require notarization for an operating agreement, but some instruments connected to the LLC (such as real estate deeds) may require notarization or witnesses. Notarizing can simplify later transactions; confirm state-specific rules.
How do I amend the agreement properly?
Follow the amendment procedure set out in the agreement: provide required notice, obtain the necessary voting percentages, draft a written amendment, and have authorized signatories execute and date it. Attach the amendment to records and distribute updated copies.
How long must I keep signed records?
Retain the signed operating agreement for the agreement term plus a conservatively long post-termination period. IRS-related records should be kept at least three years (IRC §6501(a)); HIPAA-covered documents require six years (45 CFR §164.530(j)). Check state variations.

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