Is an operating agreement required by law?

Most states do not require filing an operating agreement with the Secretary of State; it is an internal company record. Nevertheless, a signed agreement is recommended to document formalities, satisfy banks and lenders, and help preserve limited liability in litigation.

Can I sign the agreement electronically?

Yes. Electronic signatures generally meet the ESIGN Act (15 U.S.C. ch. 96) and UETA standards when intent, consent, attribution, and retention are documented. Confirm industry exceptions and follow any consumer disclosure rules when applicable.

Are notarization or witnesses necessary?

Not typically for internal operating agreements. Notarization or witnesses may be requested by lenders, title companies, or third parties; obtain acknowledgements if a third party requires them for recordation or reliance.

How do I amend the agreement later?

Follow the amendment clause in the agreement—normally a written amendment signed and dated by the member. Keep prior versions and a clear amendment history for audits, lenders, and tax purposes.

What if the sole member dies or transfers interests?

Include succession and transfer provisions specifying buyout terms, right of first refusal, and dissolution triggers. Absent clear terms, state default rules may govern transfers and cause unintended ownership changes.

Will the agreement change my federal tax status?

The operating agreement can document tax classification and allocation methods but must align with IRS rules. Single-member LLCs default to disregarded entity status for federal tax unless another election is filed; consult a tax advisor.

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Single Member LLC Operating Agreement

Single Member LLC Operating Agreement

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SINGLE-MEMBER OPERATING ARRANGEMENT OF LIMITED LIABILITY COMPANY STATE OF UTAH

THIS OPERATING ARRANGEMENT is hereby established, this the day of , 20, by the Initial Member.

ARTICLE I

FORMATION OF LIMITED LIABILITY COMPANY

1. Formation of LLC. The Initial Member has formed a limited liability company in the State of Utah named ("LLC"). The operation of the LLC shall be governed by the terms of this Arrangement and the applicable laws of the State of Utah relating to the formation, operation and taxation of a LLC.

2. Articles of Organization. The Initial Member has caused to be filed Articles of Organization, ("Articles") of record with the state, thereby creating the LLC.

3. Business. The business of the LLC shall be:

a)

and

b) To conduct or promote any lawful businesses or purposes that a limited liability company is legally allowed to conduct or promote, within this state or any other jurisdiction.

4. Registered Office and Registered Agent. The registered office and place of business of the LLC shall be and the registered agent at such office shall be . The registered office and/or registered agent may be changed from time to time.

5. Duration. The LLC will commence business as of the date of filing its Articles and will continue in perpetuity.

6. Fiscal Year. The LLC's fiscal and tax year shall end December 31.

ARTICLE II

MEMBERS

7. Initial Member. The Initial Member of the LLC is .

8. Additional Members. The first new Member, or new Members if several are to be added simultaneously, may be admitted only upon the approval of the Initial Member.

ARTICLE III

MANAGEMENT

9. Management. The Initial Member shall manage the LLC, and shall have authority to take all necessary and proper actions to conduct the business of the LLC.

ARTICLE IV

CONTRIBUTIONS, PROFITS, LOSSES, AND DISTRIBUTIONS

10. Interest of Members. Each Member shall own a percentage interest in the LLC.

11. Initial Contribution. The initial contribution of the Initial Member is $, representing a 100% interest in the LLC.

12. Additional Contributions. In the event additional Members are added, upon a majority vote, the Members may be called upon to make additional cash contributions as may be necessary to carry on the LLC's business.

13. Record of Contributions/Percentage Interests. A record shall be kept of all contributions to, and percentage interests in, the LLC.

14. Profits and Losses. The profits and losses and all other tax attributes of the LLC shall be allocated to the Initial Member until such time as additional Members are added.

15. Distributions. Any distributions of cash or other assets of the LLC shall be made as determined by the Initial Member or a majority of Members, as applicable.

16. Change in Interests. In the event additional Members are added, and if during any year there is a change in a Member's percentage interest, the Member's share of profits and losses and distributions in that year shall be determined accordingly.

ARTICLE V

VOTING; CONSENT TO ACTION

17. Voting by Members. Until such time as additional Members are added, all decisions will be made by the Initial Member.

18. Majority Defined. As used throughout this agreement, the term "majority" of the Members shall mean a majority of the ownership interest of the LLC as determined by the records of the LLC on the date of the action.

19. Majority Required. Should additional Members be added, any action that requires the vote or consent of the Members may be taken upon a majority vote of the Members.

20. Meetings - Written Consent. Action of the Members or Officers may be accomplished with or without a meeting.

21. Meetings. Meetings of the Members shall be held as determined by the Members or as may be called by a majority of the Members.

ARTICLE VI

DISSOCIATION OF MEMBERS

22. Termination of Membership. A Member’s interest in the LLC shall cease upon the occurrence of one or more of the following events:

A Member withdraws by giving the LLC thirty (30) days written notice.

A Member assigns all of his/her interest to a qualified third party.

A Member dies.

A court adjudicates the Member incompetent.

Distribution of an estate's entire interest in the LLC.

Distribution upon dissolution of an entity Member.

Bankruptcy, insolvency, or related proceedings.

Other applicable state or federal law event.

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

ARTICLE VII

RESTRICTIONS ON TRANSFERABILITY OF LLC INTEREST; SET PRICE FOR LLC INTEREST

24. LLC Interest. The LLC interest is personal property.

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

26. Sale of Interest. A Member can sell his LLC interest only as follows:

(a) Purchase price shall be paid in cash unless the total purchase price is in excess of $, in which event the purchase price shall be paid in equal quarterly installments.

The installment amounts shall be computed by applying the quarterly federal short-term rate existing at closing.

27. Set Price. The Set Price for purposes of this Arrangement shall be the price fixed by consent of a majority of the Members.

ARTICLE VIII

OBLIGATION TO SELL ON A DISSOCIATION EVENT CONCERNING A MEMBER

28. Dissociation. Except as otherwise provided, upon the occurrence of a dissociation event with respect to a Member, the LLC and the remaining Members shall have the option to purchase the dissociated Member's interest at the Set Price.

ARTICLE IX

DISSOLUTION

29. Termination of LLC. The LLC will be dissolved and its affairs must be wound up only upon such a decision by the Initial Member, provided no new Members have been added, or upon the written consent of seventy-five percent (75%) of all Members should additional Members be added.

30. Final Distributions. Upon the winding up of the LLC, the assets must be distributed to creditors, then to Members in satisfaction of liabilities, and then to Members respecting their LLC interest.

ARTICLE X

TAX MATTERS

31. Capital Accounts. Capital accounts shall be maintained consistent with Internal Revenue Code § 704 and the regulations thereunder.

32. Sole Proprietorship/Partnership Election. The Initial Member elects that the LLC be taxed as a sole proprietorship, and that if additional Members are admitted, the LLC be taxed as a partnership.

ARTICLE XI

RECORDS AND INFORMATION

33. Records and Inspection. The LLC shall maintain at its place of business the Articles of Organization, amendments, this Arrangement, and all other LLC records required by applicable law.

34. Obtaining Additional Information. Each Member may obtain from the LLC information regarding the state of the business and financial condition of the LLC and tax returns for each year.

ARTICLE XII

MISCELLANEOUS PROVISIONS

35. Amendment. Any amendment to this Arrangement may be proposed by a Member and approved in writing by a majority of the Members.

36. Applicable Law. This Arrangement shall be construed in accordance with and governed by the laws of the State of Utah.

37. Pronouns, Etc. References to a Member or Manager shall be deemed to include masculine, feminine, singular, plural, individuals, partnerships, corporations or other business entities.

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

39. Specific Performance. The non-breaching Members shall be entitled to injunctive relief to prevent breaches of this Arrangement.

40. Further Action. Each Member agrees to execute documents necessary to carry out the provisions of this Arrangement.

41. Method of Notices. Written notices shall be hand delivered or sent by registered or certified mail.

42. Facsimiles. Any copy, facsimile, telecommunication or other reliable reproduction may be used in lieu of the original writing or signature.

43. Computation of Time. In computing any period of time under this Arrangement, the day of the act, event or default shall not be included.

* * *

WHEREFORE, the Initial Member, being the single Member of this LLC, has executed this Arrangement on the day of , 20.

Signed:

Print Name:

Address:

What a Single Member LLC Operating Agreement Covers

The Single Member LLC Operating Agreement is an internal written contract that records ownership, management, and financial arrangements for a limited liability company owned by a single person or entity. Though typically not filed with the Secretary of State, it documents the sole member’s capital contributions, distribution rules, decision-making authority, transfer restrictions, and dissolution procedures. A complete agreement helps preserve limited liability by demonstrating corporate formalities, clarifies tax classification choices, supports banking and financing needs, and provides an evidentiary record if disputes arise or courts review the LLC’s operations.

Why a Clear Agreement Matters for a Single-Member LLC

A written Single Member LLC Operating Agreement preserves limited liability, records capital and distribution rules, and reduces ambiguity in disputes or audits. It supports banking, lender, and investor due diligence, clarifies governance, and documents tax elections and allocation methods to align with IRS expectations and state law.

Who Prepares and Relies on This Agreement

Owners, advisors, and counterparties commonly prepare or request the agreement when documenting operations or establishing accounts and credit.

Owner-operator managing a small business and seeking liability protection and clear tax treatment.
Independent contractor forming an LLC to separate personal and business assets and contracts.
Accountants, lenders, or investors requesting a signed agreement to verify authority and financial arrangements.

Keep a signed copy accessible to advisors and store it securely as part of corporate records to demonstrate compliance with formalities.

Step-by-Step: Prepare, Execute, and Store the Agreement

Complete these steps in order to create a legally sound, enforceable Single Member LLC Operating Agreement and retain proper records.

01

Prepare: Gather the Articles of Organization, EIN, and member identification.
02

Draft: Customize governance, distribution, transfer, and succession clauses.
03

Review: Have an attorney or accountant review tax and liability provisions.
04

Sign: Execute dated signatures; notarize only if required by state or third party.

Configure an Online Signing Workflow

Set up a secure workflow to collect signatures, authenticate signers, and retain a tamper-evident audit trail for the operating agreement.

Workflow field and configuration header	How to configure in the signing platform
Signer authentication	Email link or SMS code recommended
Signature type	Electronic signature or drawn signature image
Expiration	Set link expiry to protect access
Document retention	Enable PDF audit trail and store securely

Typical Digital Signing Process

A standard electronic signing flow preserves intent, captures an audit trail, and produces a signed PDF for the LLC record.

Upload: Upload the draft agreement as PDF or DOCX.
Prepare: Place signature, date, and initial fields.
Send: Deliver by email or secure signing link.
Complete: Signer reviews and applies electronic signature.

Technical Requirements for eSigning and eStorage

Choose a platform that supports secure eSignatures, audit trails, and integration with your accounting or document systems.

Integrations: Salesforce, NetSuite, Google Workspace
Formats: PDF/A and DOCX; template support
Authentication: Email code, SMS, or KBA options

Recommended Security and Compliance Controls

Encryption: AES-256 encryption at rest

In Transit: TLS 1.2/1.3 secure transport

Certifications: SOC 2 Type II; ISO 27001

HIPAA: BAA available for covered entities

Audit Trail: Timestamps, IP address, signer attribution

Access Controls: Role-based permissions and SSO

Key Risks and Legal Consequences to Avoid

Loss of Liability Shield: Piercing risk if formalities ignored

Tax Exposure: Incorrect classification can incur penalties

1099 Penalties: $60–$660+ per form (IRC §6721)

I-9 Violations: Fines $281–$2,789 per violation

Banking Delays: Missing agreement slows account setup

Contract Disputes: Unclear language increases litigation risk

Common Preparation Errors to Avoid

Using informal or incomplete templates that omit transfer restrictions, capital accounting rules, or dissociation procedures can create ownership disputes and expose the owner to unexpected liabilities.
Failing to match the LLC name or member name exactly to the Articles of Organization or bank records can prevent account opening and trigger tax reporting errors.
Neglecting to document capital contributions or failing to track distributions may complicate profit allocation and lead to IRS challenges during audits.
Not updating the agreement after admitting members, changing management, or selling assets risks inconsistent governance and weakens liability protections.

Pricing and Feature Snapshot for Popular eSignature Providers

Common pricing and feature trade-offs to consider when selecting an eSignature provider to execute operating agreements; signNow is listed first for comparison.

	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	Varies by vendor	Varies by vendor	Varies by vendor	Varies by vendor
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 Execution and Validity

Practical answers to routine questions about signatures, amendments, enforceability, and state-specific concerns for Single Member LLC Operating Agreements.

Need help? Contact support

Is an operating agreement required by law?
Most states do not require filing an operating agreement with the Secretary of State; it is an internal company record. Nevertheless, a signed agreement is recommended to document formalities, satisfy banks and lenders, and help preserve limited liability in litigation.
Can I sign the agreement electronically?
Yes. Electronic signatures generally meet the ESIGN Act (15 U.S.C. ch. 96) and UETA standards when intent, consent, attribution, and retention are documented. Confirm industry exceptions and follow any consumer disclosure rules when applicable.
Are notarization or witnesses necessary?
Not typically for internal operating agreements. Notarization or witnesses may be requested by lenders, title companies, or third parties; obtain acknowledgements if a third party requires them for recordation or reliance.
How do I amend the agreement later?
Follow the amendment clause in the agreement—normally a written amendment signed and dated by the member. Keep prior versions and a clear amendment history for audits, lenders, and tax purposes.
What if the sole member dies or transfers interests?
Include succession and transfer provisions specifying buyout terms, right of first refusal, and dissolution triggers. Absent clear terms, state default rules may govern transfers and cause unintended ownership changes.
Will the agreement change my federal tax status?
The operating agreement can document tax classification and allocation methods but must align with IRS rules. Single-member LLCs default to disregarded entity status for federal tax unless another election is filed; consult a tax advisor.

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