LLC Operating Agreement: Definition, Top Terms
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What Is an LLC Operating Agreement?
A Limited Liability Company (LLC) operating agreement, also known as an LLC agreement, LLC partnership agreement, or operating agreement, is a legal document that establishes the relationship of the LLC members to one another. The LLC operating agreement details each member's rights and responsibilities. It outlines how these individuals will run the shared company together.
An LLC is a business entity that offers limited liability protection to its members. If a creditor pursues a collection on the business's debts, the LLC protects each individual member. This is different from a general partnership, in which the members are personally liable for the debts and responsibilities of the business. The LLC itself is not taxed. Rather, each member pays taxes on their share of the business's profits or losses based on that individual's personal income. It is worth noting that an LLC can elect to be taxed, and if it does, it is subject to corporate taxation.
Given LLCs are state-level entities, it is always recommended to always check state laws for any specific questions you may have regarding your LLC. This article offers general advice and guidelines, but seek out a corporate lawyer with experience in LLCs if you have any state-specific questions.
Components of an LLC Agreement
There are no formal requirements for the information included in your LLC Agreement. You should tailor this document to the unique needs of your business. However, the components listed below are typically included in some fashion.
Organization
This section specifies:
- The name and address of the company
- The date the LLC was created
- Who the members are
- The structure of ownership
- A description of services or statement of intent for the business
Management and Voting
This part of the document details how the company is managed. You may have all members involved in the management or specify certain individuals who are responsible for various aspects of management. It's important to detail each individual's duties and specify their level of authority. You should also address how managers are elected, how long they serve, and what salary they are paid.
This section also specifies if and how voting will take place. If members choose to vote on decisions, you must determine how votes are allocated. You might give each member the same number of votes or distribute votes by ownership. The operating agreement should also specify how many votes are needed for a particular action.
In most cases, voting will take place at member meetings. Specify how often meetings will take place. Here is an article that explains how to hold a successful LLC meeting.
Capital Contributions
This section details:
- Funds members have contributed to the company
- Contributions of cash or services provided by members
- Methods for raising future funds, including whether members may be required to contribute additional funding
- Whether ownership units are awarded in exchange for funds
Distributions
Here, you will detail how profits and losses are distributed. You must specify the allocation of funds, physical property, and all other business assets. In most cases, members share in profits and losses in accordance with their percentage of interest in the company.
This section also details when profits are distributed. You should specify whether members can draw from their profits at will or if they're required to wait for a specified period. Take a look at this article to explore LLC ownership and profit distribution in more detail.
Membership Changes
Changes in membership may happen for a variety of reasons. This section of your LLC operating agreement should specify how you will handle all types of membership changes, including:
- Adding new members
- Transferring membership directly from an existing member to someone new
- Whether existing members have the right of first refusal when another member sells their shares
- The death of a member
- The bankruptcy of a member
- Divorce between members
- What happens if a member becomes disabled
- How a member can voluntarily withdraw
- Actions that may justify the expulsion of a member
- The process of expelling a member from the LLC
Dissolution
The final section will typically detail how the LLC may be dissolved. This details the circumstances in which you might dissolve the LLC and how you will allocate assets and conclude the company's affairs.
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The Difference Between an LLC Operating Agreement and Articles of Organization
The articles of organization is a legal document that's required for the formation of an LLC. You must file this with the state to register the LLC as a formal business entity. You will file your articles of organization to establish the LLC initially. Your LLC operating agreement is an internal document that's drafted after the LLC has been formed.
What State To Establish Your Operating Agreement In
If you're operating a physical business, you must register your LLC and create all subsequent documents within the state where that business resides. However, if you are running an online company where the physical location isn't clearly defined, you may be able to form your LLC in a state other than the one where you live.
Each state has different requirements for LLCs, so you may want to investigate the differences if you have some flexibility in where you form your LLC. If you would like to register your LLC in another state, you must work with a Registered Agent residing in that state. The Registered Agent is either a member of the LLC or a third party who collects legal notices on behalf of the LLC. In some states, the Registered Agent must be a third party.
You must note the name of your Registered Agent on the LLC operating agreement. If you operate in multiple states, you do not need multiple operating agreements. Create your operating agreement for the state in which the LLC is registered.
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What To Do With Your LLC Operating Agreement
Check with your Secretary of State's office for the legal requirements regarding your LLC operating agreement. Some states require that you file an initial report of the information or publish a notice of your LLC's formation. You do not need to file the LLC Operating Agreement itself anywhere, but you should:
- Provide a copy to all members of the LLC
- Keep the agreement in a file with other important business documents
- Review and update the document any time you add or lose a member
- Review the document annually for any necessary changes
The Benefits of an LLC Operating Agreement
An LLC operating agreement is required by law for all LLC's in:
- California
- Delaware
- Maine
- Missouri
- Nebraska
- New York
In other states, this document is not required, but it is strongly recommended. In an LLC with multiple business partners, the operating agreement provides essential operating guidelines that clearly define each member's role within the company. If you have sole ownership of your LLC, this document will give you greater credibility as a well-organized business and will give you greater legitimacy if you're called to uphold the status of your LLC in court.
Your LLC operating agreement can also help you override your state's default rules. Each state has a set of governing rules that your LLC must default to if you have not set forth different rules. For example, many states will have you divide profits and losses equally unless otherwise specified. However, if your members have contributed different amounts to the business, you may want to allocate profits and losses in accordance with their investments.
It's typically best to consult with a contract lawyer when you're preparing your LLC operating agreement. This ensures that all members' rights are protected and that the document is properly drafted to stand up in court should a dispute take place. You may also want to consult with a tax lawyer, particularly regarding the distribution of profits. Keep in mind that you can and should amend your LLC operating agreement as your company grows and changes. Keep this document up to date so that it always upholds the best interests of the company and its members.
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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Christina J.
Christina J.
I am a Texas Board Certified specialist in Labor and Employment Law (since 2002) with nearly three decades of experience across private practice, Big Law, in-house counsel, and national civil rights litigation. I currently own and manage Jump Start Legal Justice Center, where I lead nationwide litigation for nonprofit domestic entities, defending free speech and constitutional rights, litigating Title VI and Title VII claims for professors, and representing individuals in No Fly list and watchlist challenges. For nearly a decade, I served as Civil Litigation Department Head at the Constitutional Law Center for Muslims in America (now MLFA), managing a nationwide team of up to 12 attorneys, paralegals, and interns. My docket included religious freedom and religious discrimination cases for Muslim, Jewish, and Native American clients; birthright citizenship challenges; and inmate rights litigation for meal and prayer accommodations. My employment law background includes senior roles at Littler Mendelson, Jackson Walker, Akin Gump, and Jackson Lewis, as well as serving as the Texas state expert for Thomson Reuters Practical Law. I have counseled corporations on wage/hour compliance, non-compete agreements, FMLA, discrimination, retaliation, and workplace investigations. I have first-chaired federal court jury trials and handled appeals across the Second, Third, Fourth, Fifth, Sixth, Ninth, Tenth, Eleventh, and D.C. Circuits. I also hold a Mediation Certification from the University of Houston and have served as an Associate Hearing Officer for the City of Dallas. I am a multiple-year Texas Super Lawyer (through 2026), Fellow of the Texas Bar College, and Fellow of the American Bar Association. I draft and review employment agreements, severance agreements, non-compete agreements, employee handbooks, independent contractor agreements, and settlement agreements. I also advise on nonprofit compliance, religious accommodations, and constitutional claims. Bar admissions: Texas (1996), U.S. Supreme Court, multiple Circuit Courts of Appeal, and federal district courts in Texas, Arkansas, Colorado, and Illinois (General Bar and Trial Bar).
Allen L.
Clear, strategic legal guidance when you need it most—whether you're planning ahead or defending a position. Legal challenges shouldn't feel confusing or overwhelming. Whether you're building an estate plan, structuring a business, or navigating a dispute, my practice is built on clarity, care, and practical strategy. I work with clients who want real solutions—not just paperwork—through planning and advice that truly fits their goals, families, and businesses. Planning & Structure I focus on estate planning, asset protection, and business succession, helping individuals and entrepreneurs organize their assets, reduce risk, and prepare for every stage of life. Whether you're setting up your first living trust, shielding your business from liability, or updating an existing estate plan, you'll receive clear guidance, fixed-fee pricing, and responsive support from start to finish. Each plan I design is tailored to your real-world priorities: preserving wealth, avoiding unnecessary taxes and probate, and ensuring the people you love are protected when it matters most. I also focus on general business matters outlined below. Disputes & Defense When legal conflicts arise—disputed contracts, demand letters, settlement negotiations, or litigation decisions—I provide realistic risk assessment and strategic guidance. I help clients understand their actual exposure (not just best-case scenarios), identify leverage points, and navigate toward efficient resolution. If you're facing a legal claim or need to evaluate your position before responding, I can walk you through the realistic options and their costs. Services: Estate Planning & Asset Protection --Simple wills and powers of attorney --Living trusts for small estates --Buy-sell agreements for family businesses Business Formation & Agreements --LLC or S-Corp formation filings --Operating Agreements / Shareholder Agreements --Founder or Investor Agreements --Bylaws and Minutes templates --Registered agent setup guidance Contracts & Commercial Matters --Service Agreements (consulting, marketing, software, design, etc.) --Independent Contractor Agreements --Employment contracts and offer letters --Non-compete, non-solicitation, or confidentiality agreements --Employee handbooks or HR policy updates --Termination or severance agreements --NDAs (Non-Disclosure Agreements) --Partnership or Joint Venture Agreements --Sales or Vendor Contracts --Licensing or IP Agreements Terms and conditions SaaS Platforms --Terms of Service --Privacy Policy --Independent Contractor Agreements --Customer/User Agreements --Liability Waivers --Cancellation & Refund Policy --Non-Solicitation Clauses --Marketplace compliance documents Real Estate --Commercial lease drafting or review --Residential lease review --Purchase & sale agreements --Short-term rental (Airbnb) contracts --Property management agreements Professional Approach: I leverage modern legal research and writing technologies—including AI-assisted tools—to enhance the quality, speed, and clarity of my analysis. Like many legal professionals today, I use these tools to organize research, improve communication, and catch errors. On research tools: case law and statutory verification runs through a vLex/Fastcase subscription, and drafting and first-pass review is AI-assisted. Every analysis I provide is thoroughly reviewed and reflects my independent professional judgment as a licensed attorney. AI is a tool that supports my work; it does not replace it.
"It was a pleasure to work with Allen, he was very professional and did a great job assisting me with all the important legal documents."
Patrick O.
Patrick O.
20+ years as both a business executive and also an attorney, I create practical business solutions for legal issues. See Reviews: https://drive.google.com/drive/folders/1EZ4MMM5Tc0hrfwtgl0TN5G7j0QcfYA4q
"Was able to answer questions and provide guidance in an effective manner, thanks Patrick!"
Michael C.
I offer top-tier legal expertise in startups, corporate governance, and general legal research. As a professor and published author, I have established myself as a legal expert, writer, and scholar. My strong research skills and innovative thinking make me a highly capable business consultant, legal adviser, and copywriter. Currently licensed to practice in Minnesota and Arkansas. Recent freelance projects include business plans, contract drafting, legal advisory memoranda, due diligence, pre-trial motion practice, and discovery review.
"Michael was fast, helpful, and delivered exactly what I asked for!"
Bryan B.
Experienced attorney and tax analyst with a history of working in the government and private industry. Skilled in Public Speaking, Contract Law, Corporate Governance, and Contract Negotiation. Strong professional graduate from Penn State Law.
"Bryan was quick and efficient. I have a great working Operating Agreement now."
Benjamin W.
I am a California-barred attorney specializing in business contracting needs. My areas of expertise include contract law, corporate formation, employment law, including independent contractor compliance, regulatory compliance and licensing, and general corporate law. I truly enjoy getting to know my clients, whether they are big businesses, small start-ups looking to launch, or individuals needing legal guidance. Some of my recent projects include: -drafting business purchase and sale agreements -drafting independent contractor agreements -creating influencer agreements -creating compliance policies and procedures for businesses in highly regulated industries -drafting service contracts -advising on CA legality of hiring gig workers including effects of Prop 22 and AB5 -forming LLCs -drafting terms of service and privacy policies -reviewing employment contracts I received my JD from UCLA School of Law and have been practicing for over five years in this area. I’m an avid reader and writer and believe those skills have served me well in my practice. I also complete continuing education courses regularly to ensure I am up-to-date on best practices for my clients. I pride myself on providing useful and accurate legal advice without complex and confusing jargon. I look forward to learning about your specific needs and helping you to accomplish your goals. Please reach out to learn more about my process and see if we are a good fit!
"Benjamin was super helpful and prompt in delivering his services. What I appreciated most was his ability and willingness to convey information in a clear manner for a non-lawyer type like me to understand. Thanks again!"
Ema T.
I am a NY licensed attorney experienced in business contracts, agreements, waivers and more, corporate law, and trademark registration. My office is a sole member Law firm therefore, I Take pride in giving every client my direct attention and focus. I focus on getting the job done fast while maintaining high standards.
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Business Contracts
LLC Operating Agreement
Florida
What should be included in my LLC operating agreement?
I recently formed an LLC with two other partners and we are in the process of finalizing our operating agreement. I am looking for advice on what should be included in the agreement in order to ensure the legal and financial protection of all partners involved. I understand the importance of having a comprehensive agreement in place, and would like to ensure that all of our interests are properly represented.
Fabian G.
Hello, My name is Fabian Garcia and I am a Florida-licensed attorney. What follows is a brief overview of certain important considerations when drafting an Operating Agreement: There are several items that need to be considered when drafting an Operating Agreement. First, you will need to determine whether your company will be manager-managed or member-managed. This is important because it will lay the foundation as to which individuals/entities will have the ability to control the company. Proper definitions should be used throughout the entire Operating Agreement to make sure that there are no ambiguities. Capital contributions are generally attached as an exhibit to the Operating Agreement, and describe the amounts that each member has contributed. Note that capital contributions can also be in the form of sweat equity. You will also want to make sure and address whether additional capital contributions will be required. Another item that must be touched on the Operating Agreement is membership. How will new members be admitted? Will a vote be required? Note that typically, members are not liable for the company's obligations by merely being members. There should be language addressing that as well. You will also want to make sure that there is a mechanism as to how members may dissociate from the company and whether the remaining members will have any buy-out rights. Next, the Operating Agreement should clearly address how profits and losses will be allocated. This goes hand in hand with how distributions will be made to the members, if any. Typically, if it is a manager-managed company, the manager will determine when the distributions must be made. All of the items which need to be voted on, along with the required voting percentages, need to be included in the Operating Agreement. The Operating Agreement should address whether the members will be able to transfer their membership interests in the company. Some third-parties may be considered permitted transferees. Additionally, the Operating Agreement should generally state that it will indemnify the members in the event of a lawsuit, under certain circumstances. Lastly, the Operating Agreement should always have a dispute resolution mechanism, indicating how disputes are to be handled. I routinely assist business owners by drafting Operating Agreements, along with other complex legal documents. Please let me know if I can ever be of assistance. Thank you.
Corporate
LLC Operating Agreement
Texas
Does a single member llc need an operating agreement?
I'm in Texas. I know operating agreements aren't required everywhere.
Craig C.
Texas has no requirement for an operating agreement. However, I generally advise all LLCs to have one. If nothing else, it assists as part of the "paper trail" in proving that the LLC was a separate entity from the sole member and helps to maintain liability protection.
Business
LLC Operating Agreement
Kansas
Can an LLC operating agreement be modified without the consent of all members?
Can an LLC operating agreement be modified without the consent of all members? I am a member of an LLC and we have been operating under a certain agreement for several years. However, there have been some changes in our business and it is necessary to make amendments to the operating agreement. One of the members is reluctant to agree to the changes, but the majority of us believe it is in the best interest of the company. We want to know if it is possible to modify the operating agreement without the unanimous consent of all members, and if so, what steps are required to do so legally.
Cherie M.
It primarily depends on what your operating agreement says regarding consent for making changes. That will control the process. If it is just changes to the operating agreement, it does not need to be reported to the Secretary of State. Changes to the Articles of Organization would need to be reported, however.
Securities
LLC Operating Agreement
Texas
Can an LLC buy stocks for a fee?
I'm forming an LLC in order to manage some money investing in the stock market, (Friends and family only) I will be charging a percentage fee on the profits. Can an LLC be formed to invest in stocks and charge a performance fee? Thank you.
Forest H.
Generally, if you are "advising others regarding investment decisions for compensation" you are regulated by the SEC as an investment advisor and subject to oversight and registration with the SEC. There are exemptions, for example, a "Family Office" is not required to register. However, all investors and owners in a Family Office must be actual family and friends would be excluded.
Business
LLC Operating Agreement
California
Can an LLC operating agreement be modified without the unanimous consent of all members?
I am a member of an LLC and we currently have an operating agreement in place that outlines the rights and responsibilities of each member. However, there have been some changes in the business and I believe that certain provisions of the operating agreement need to be modified in order to better reflect our current needs and goals. Some members are resistant to these changes and I would like to know if it is possible to modify the operating agreement without obtaining unanimous consent from all members, and if so, what steps need to be taken to make these modifications legally binding.
Dolan W.
Hello! My name is Dolan and I'm happy to help. Generally, an agreement can't be modified without the consent of the parties involved and additional consideration included (e.g. something in exchange). Whether the operating agreement can be changed depends on the terms itself. The parties can agree that only a majority vote is needed or may require a unanimous agreement for something like this. We can review the operating agreement for you and let you know what your rights are and offer some advice. Best of luck!
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Operating agreement
Location: Delaware
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Doc Type: LLC Operating Agreement
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