Free LLC operating agreement template

How to fill it in

An operating agreement looks long, but most of it is fill-in-the-blanks once you have decided a few key things: who owns what, how it is managed, and how profits are split.

• Company details: enter the LLC name, principal office, registered agent, purpose, and the date you filed your articles of organization.
• Members and contributions: list each member and what they put in, whether cash, property, or services.
• Ownership: set each member's ownership percentage so they add up to 100.
• Management: choose member-managed or manager-managed, matching your articles of organization.
• Voting and profits: set the voting thresholds for major decisions, and confirm profits are shared by ownership percentage unless you want a different split.
• Sign: all members sign, then keep the signed agreement with your company records rather than filing it.

Is an operating agreement required?

Whether your state legally requires an operating agreement depends on where you formed the LLC, and the honest answer is that most states do not. A handful do, commonly listed as California, Delaware, Maine, Missouri, and New York. These states land on the list for different reasons, which is worth understanding. New York goes furthest and requires the agreement to be in writing. Delaware, one of the most popular states to form an LLC, is the opposite kind of case: its LLC law is built around freedom of contract, letting the members set almost any rules they want, which is exactly why having a written agreement there is so useful. Even in these states you do not file the agreement with anyone; you adopt it and keep it with your company records. Everywhere else it is optional but strongly recommended, a point the U.S. Small Business Administration makes in its own guidance. Because the rules and the list of states can change, and because your Secretary of State is the authority for your state, check your state's requirements before you rely on the general rule. The practical takeaway is the same in every state: having a signed operating agreement is a good idea whether or not the law makes you do it.

Member-managed vs. manager-managed

One of the first choices in the agreement is how the LLC is managed, and there are two options. In a member-managed LLC, the owners run the business themselves, and each member can generally act for the company in day-to-day matters. This is the common choice for small LLCs where all the owners are involved. In a manager-managed LLC, the members appoint one or more managers, who can be members or outsiders, to run the business, while the other members take a passive, investor-style role. This suits LLCs with silent owners or outside investors. Whichever you pick usually has to match the management structure you selected on the articles of organization you filed with the state, so keep the two consistent.

Why you need one even for a single-member LLC

It is easy to assume a one-owner LLC does not need an operating agreement, since there is no one to agree with. It still helps, for three reasons. First, it reinforces the liability shield. A signed agreement is evidence that the LLC is a genuine separate entity rather than an extension of you personally, which makes it harder for a creditor to pierce the corporate veil and reach your personal assets. Second, it overrides your state's default rules. Without an agreement, your state's LLC act decides questions you may care about, from how the business is managed to what happens if you become unable to run it, and those defaults may not be what you would choose. Third, it is practical: banks often ask for an operating agreement to open a business account, and lenders or investors expect to see one. A single-member operating agreement is short, but it does real work.

How LLCs are taxed by default

An operating agreement is not a tax return, but it usually notes how the LLC expects to be taxed, so it helps to know the defaults. The Internal Revenue Service does not have a separate LLC tax category. By default, a single-member LLC is treated as a disregarded entity, meaning its income is reported on the owner's personal return on Schedule C, and a multi-member LLC is taxed as a partnership, filing Form 1065 and issuing a Schedule K-1 to each member. An LLC can instead elect to be taxed as a corporation by filing Form 8832, or as an S corporation by filing Form 2553, which some owners do to manage self-employment tax. These choices have real consequences and a timing rule that limits how often you can switch, so talk to a tax professional about what fits your situation before you elect anything.

Operating agreement vs. articles of organization

People mix these two up, but they do different jobs. The articles of organization, called a certificate of formation in some states, is the public document you file with the Secretary of State to legally create your LLC. It is short and lists basic facts: the company name, its address, its registered agent, and often whether it is member-managed or manager-managed. The operating agreement is the internal contract among the members that says how the LLC actually runs. It is longer, it is private, and you do not file it with the state; you keep it with your records. A useful way to remember it: the articles bring the LLC into existence, and the operating agreement is its rulebook. You need the articles to form the company in every state, and the operating agreement is what makes it run the way you want.

Signing it

An LLC operating agreement is a private contract among the members, so it does not need to be notarized or witnessed; it is binding once all the members sign it. You can print it and sign by hand or fill it in and sign online, and an electronic signature is valid for it under the ESIGN Act and UETA. Notarizing is optional and only adds an extra layer of proof; even New York, which requires the agreement to be written, does not require it to be notarized. After signing, keep the agreement with your company records alongside your articles of organization and any amendments. Do not file it with the state, and update it whenever your ownership, management, or membership changes.