What an operating agreement does
An operating agreement is the LLC's rulebook. It records who the members are, what each put in, how profits and votes are shared, who runs the business, and what happens when a member wants out, dies or the business closes. Without one, your state's LLC law supplies default rules for all of those questions, and the defaults may not be what you and your partners expect.
It also helps keep the LLC separate from its owners. A signed agreement, a bank account in the LLC's name and records kept apart from your own are what show a court or a lender that the LLC is a real business, not a personal account under another name.
What this template covers
The agreement follows the order most operating agreements use:
- Formation. The state the LLC was formed in, its name, principal office, registered agent, purpose and term.
- Members and capital. Who the members are, what each contributed, and how loans from members are treated.
- Allocations and distributions. How profits, losses and cash are shared, by percentage interest for an LLC with several members.
- Management. Whether the members or appointed managers run the LLC, how decisions are made, and the major decisions that need every member's consent.
- Taxes, books and records. How the LLC is taxed by default, the partnership representative for IRS audits, the fiscal year and record keeping.
- Transfers. Who may sell or transfer an interest, first refusal for the other members, admitting new members, and what happens when a member dies.
- Dissolution. When the LLC ends, who winds it up and the order in which its assets are paid out.
- General provisions. Amendments, governing law, notices and signatures.
Schedule A at the end lists each member's contribution and percentage interest.
One member or several
The agreement changes with the number of members. With one member, it's short: the member owns everything, makes every decision and decides when to take money out. It still matters, because it shows the LLC is run as a separate business and says what happens to it if the member dies. See the single-member LLC operating agreement.
With two or more members, it sets out percentage interests, capital accounts, voting by majority, the decisions that need everyone's consent, and the rules for selling an interest or buying out a member. See the multi-member LLC operating agreement.
Run by members or by managers
Most small LLCs are member-managed: every member can act for the LLC in its ordinary business. A manager-managed LLC is run by one or more managers chosen by the members, and the other members are owners only. Choose manager-managed when some members are investors who won't work in the business. Many states ask which one you are on the formation filing, so make the agreement match it.
How to finish and sign it
- Check that the LLC's name matches the formation filing exactly, including its ending.
- Fill in or remove anything left as a blank line. Every member should read the whole agreement before signing.
- Every member signs and dates it. Electronic signatures count, and the members can sign separate copies.
- Keep the signed agreement with the LLC's records, give each member a copy, and update Schedule A when anything in it changes.
When to have a lawyer look at it
The template suits a straightforward LLC. Ask a lawyer in your state to review it if members will earn their share over time, profits won't follow the percentage interests, an outside investor is putting in money, you plan to elect S corporation tax treatment with several members, the LLC will hold real estate, or it's a professional LLC whose members need a license.
LLC operating agreements by state
How to make an LLC operating agreement
- Choose the state where the LLC was formed and type its exact name as it appears on the formation filing.
- Choose whether the members run the LLC or appoint managers to run it.
- Add each member with their contribution and, if there's more than one, their percentage share.
- Read the agreement in the preview and change anything that doesn't fit.
- Download the Word file or print it, then have every member sign and date it.
- Keep the signed copy with the LLC's records and give each member a copy.
Common questions
Do I file the operating agreement with the state?
No. The state receives only the LLC's formation filing. The operating agreement is an internal document: keep the signed original with the LLC's records and give each member a copy.
Is the template really free?
Yes. There's no sign-up, no email address and no paid version. The agreement is built in your browser, and nothing you type is sent to us.
Does an operating agreement need to be notarized?
An operating agreement is a contract between the members, and the members' signatures are what make it binding. A lender or bank may ask for its own formalities, such as a certified copy.
Can we change the agreement later?
Yes. This agreement can be amended in a writing signed by all members, or by the sole member of a one-member LLC. Update Schedule A whenever a member joins or leaves or a share changes.
Is this legal advice?
No. It's a general-purpose agreement in plain English. If your LLC has investors, unequal profit splits, members who earn their share over time, professional licenses or real estate, have a lawyer in your state review it.