Operating Agreement Basics for LLC Owners

An operating agreement is the internal contract that says who owns the LLC and how it is run. Most states do not require you to file it, but you should still have one.

What it usually covers

Members and ownership percentages
How profits, losses and distributions are shared
Who manages the business (members or a manager) and how decisions are made
What happens when a member leaves, dies or wants to sell
How the LLC can be dissolved

Single-member LLCs

Even with one owner, a written agreement documents that the LLC is a separate entity and helps when a bank asks for it. Whether a particular state requires a written agreement, or what default rules apply when there is none, depends on that state's LLC statute; read it or ask an attorney.

Multi-member LLCs

With partners, the agreement matters much more. Without one, your state's default rules fill the gaps, and they may not match what you intended. Consider having an attorney review it.

Frequently asked questions

Do I file my operating agreement with the state?

Generally no. It is kept with your company records.

Can I use a free template?

A template can work for a simple single-member LLC. For partners or significant assets, have an attorney review it.

Want someone else to handle the filing?

A formation service files the paperwork for a fee on top of the state fee and often includes a first year of registered agent service. It saves time, but you can file directly with the state for the state fee alone. Compare DIY and services.

How to Start an LLC: Step-by-Step Checklist

General information, not legal or tax advice. See our methodology and disclosure.