An LLC Operating Agreement, Do You Need One?
An LLC Operating Agreement is a legal document that outlines the ownership structure, management, and operating procedures of a Limited Liability Company (LLC). It serves as a governing document that helps clarify how the business will function, reducing potential disputes between owners.
Even though most states don’t legally require an LLC Operating Agreement, having one is highly recommended for all LLCs—including single-member LLCs.
Is an LLC Operating Agreement Required?
The legal requirement for an Operating Agreement depends on your state. While most states don’t mandate it, a few—such as California, Delaware, Maine, Missouri, and New York—require LLCs to have an Operating Agreement in place, even if it’s not filed with the state.
Regardless of legal requirements, having an Operating Agreement provides protection and clarity for business owners.
Do Single-Member LLCs Need an Operating Agreement?
Yes! Even if you’re the only owner of your LLC, an Operating Agreement can:
✔ Reinforce limited liability protection – Helps distinguish you as a separate legal entity from your business, which is important in case of lawsuits.
✔ Clarify business operations – Outlines how profits, expenses, and responsibilities are handled.
✔ Improve credibility – Banks and investors often require an Operating Agreement before approving business loans or accounts.
While a Single-Member LLC Operating Agreement may be simpler, it’s still valuable for legal protection and business organization.
How to Get an LLC Operating Agreement
You can create an Operating Agreement in several ways:
1. Draft One Yourself
If you have a basic understanding of business agreements, you can write your own Operating Agreement using an online template. However, it’s important to ensure it covers all necessary details.
2. Use an Online Legal Service
Many legal platforms offer customizable Operating Agreement templates, making it easy to create one without hiring an attorney.
3. Hire a Business Attorney
If you have multiple members or a complex business structure, consulting a business attorney can help ensure your agreement is legally sound and protects all parties involved.
What Should an LLC Operating Agreement Include?
A well-structured Operating Agreement typically covers:
✔ Ownership percentages – Defines each member’s share in the company.
✔ Management structure – Specifies whether the LLC is member-managed or manager-managed.
✔ Profit and loss distribution – Explains how money is allocated among members.
✔ Voting rights and decision-making – Outlines how business decisions are made.
✔ Rules for adding or removing members – Details what happens if a member leaves or passes away.
✔ Dissolution process – Defines the steps for closing the business if needed.
Final Thoughts
While an LLC Operating Agreement isn’t always legally required, having one is essential for protecting your business, maintaining legal compliance, and ensuring smooth operations.
Even Single-Member LLCs benefit from an Operating Agreement, as it helps maintain separation between personal and business finances. Whether you draft one yourself or consult a legal professional, having a solid Operating Agreement is a smart move for any LLC owner.