Key Takeaways
- Gather first: Collect member names, ownership percentages, capital contributions, management structure, and profit-sharing details before drafting.
- Structure matters: Include introduction, ownership, management, dissolution, and additional provisions; then review and have all members sign.
- Introduction: State LLC name, formation date, state, and purpose clearly at the start of the document.
- Define roles: Specify who manages the LLC, how decisions are made, and how profits and losses are distributed.
- Sign and store: Have every member sign and keep the original with your company records; amend when the business changes.
Table of Contents
How to Write an Operating Agreement for your Limited Liability Company
An operating agreement is a legal document that outlines the ownership and operating procedures of a limited liability company (LLC).
It is an essential document that every LLC should have.
In this article, we will provide you with a step-by-step checklist on how to write an operating agreement for your LLC.
Step 1: Gather Information
Before you start drafting your operating agreement, you need to gather some information.
Make sure you have the following documents on hand:
- The names and addresses of all the members of your LLC
- The percentage of ownership of each member
- The capital contributions of each member
- The management structure of your LLC
- The voting rights of each member
- The distribution of profits and losses
Step 2: Draft the Introduction
The introduction of your operating agreement must include the name of your LLC, the date when it was formed, and the state where it was formed.
You should also include a brief statement about the purpose of your LLC.
Step 3: Define the Ownership Structure
In this section, you should define the ownership structure of your LLC.
This includes the percentage of ownership of each member and the capital contributions of each member.
You should also include information about how profits and losses will be distributed among the members.
Step 4: Define the Management Structure
In this section of your operating agreement, you should define the management structure of your LLC.
This includes information about who will manage the LLC and how decisions will be made.
You should also include information about the voting rights of each member.
Step 5: Define the Dissolution Process
This is the part of your OA where you clearly define the process for dissolving your LLC.
This includes information about how the LLC will be dissolved and how the assets will be distributed among the members.
Step 6: Include Additional Provisions
The last section of your operating agreement includes any additional provisions that are specific to your LLC.
Most people usually include information about how new members can be added to the business, how old members can be removed, and how to resolve disputes between owners.
Step 7: Review and Sign
Once you have drafted your operating agreement, you should review it carefully to make sure that it accurately reflects the ownership and operating procedures of your LLC.
Once you are satisfied with the document, you should have all the members of your LLC sign it.
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Checklist
Here is a 7-step checklist to help you write your very own operating agreement:
1. Gather information about your LLC
2. Draft the introduction
3. Define the ownership structure
4. Define the management structure
5. Define the dissolution process
6. Include additional provisions
7. Review and sign
We hope that this checklist helps you write an operating agreement for your LLC.
FAQs - Frequently Asked Questions About Writing an LLC Operating Agreement
What is an LLC operating agreement and do I need one?
An operating agreement is a legal document that outlines ownership and operating procedures for your LLC; it is recommended for every LLC even when not required by state law.
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It defines member ownership percentages, capital contributions, management structure, and how profits and losses are shared.
Many states do not require filing the operating agreement, but having one helps preserve limited liability and prevents disputes.
Banks and investors often ask to see an operating agreement before opening accounts or funding the business.
Without one, state default rules apply, which may not match how you want to run your company.
What information do I need before writing an operating agreement?
Gather member names and addresses, ownership percentages, capital contributions, management structure, voting rights, and how profits and losses will be distributed.
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You will need the exact legal name of the LLC, formation date, and state of formation.
Decide whether the LLC will be member-managed (all members manage) or manager-managed (designated managers).
Agree on voting rules (e.g., one vote per member vs. per ownership share) and what decisions require a vote.
Having this information ready speeds up drafting and reduces the need for later amendments.
What are the main sections of an operating agreement?
Typical sections include an introduction, ownership structure, management structure, dissolution process, and additional provisions such as adding/removing members and dispute resolution.
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The introduction states the LLC name, formation date, state, and purpose.
Ownership structure covers capital contributions and profit-and-loss allocation.
Management structure defines who runs the LLC and how decisions are made.
Dissolution describes when and how the LLC can be wound up and assets distributed.
Additional provisions often cover transfers of interest, dispute resolution, and amendments.
Do all LLC members need to sign the operating agreement?
Yes. All members should sign the operating agreement so it reflects unanimous agreement and is enforceable among the members and against third parties where applicable.
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Signed agreements reduce the chance that a member later claims they did not agree to key terms.
Some states and lenders expect the operating agreement to be executed by all members.
Keep an original signed copy with your company records and give each member a copy.
Any material amendment should also be signed by all members (or as required by the agreement).
Can I write an LLC operating agreement myself?
You can draft one using a checklist or template, but for multi-member LLCs or complex arrangements, having an attorney review or draft it is advisable.
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Single-member LLCs often use simple agreements; templates can be a good starting point.
Multi-member LLCs involve more issues (voting, buyouts, disputes), so professional review is recommended.
State laws differ; an attorney can ensure your agreement complies and uses the right terminology.
A well-drafted agreement can prevent costly litigation and clarify expectations for everyone.
If you have any questions or need further assistance, please don’t hesitate to contact us.
