The LLC operating agreement
Written by the filing team at FastBusinessFiling. Reviewed .
An operating agreement is the private contract between an LLC's owners setting out who owns what share, who can make which decisions, how profit is split, and what happens when somebody dies, leaves or wants to be bought out. Most states don't require one and none of them want it filed — it stays in your own records. That's exactly why it gets skipped, and why it's usually missing at the precise moment somebody needs it: a bank opening an account, a lender underwriting a loan, a buyer doing diligence, or two founders who remember the split differently. Without one, your state's default LLC rules decide these questions for you, and those defaults were not written with your business in mind.
The short version
- It's a private document. No state asks you to file it.
- A handful of states require you to have one, including California, Delaware, Maine, Missouri and New York — check your own state's statute.
- With no agreement, the state's default rules apply, and they often split things equally regardless of who put in what.
- Banks, lenders and buyers ask for it. That's usually when people discover they don't have one.
- For a single-member LLC it's short, and it's the document that shows the company is separate from you.
What it actually decides
Ownership percentages, and whether they match what each person contributed. Who can sign contracts, hire, borrow, or spend above some threshold without asking anyone. How profits and losses are allocated, and when distributions actually get paid out. What happens when a member wants to leave, dies, divorces, or stops doing the work while still owning a quarter of the company.
That last category is the one that turns a good partnership into a bad year. Two people start something, one drifts away, and the agreement is silent on whether the one still working can buy out the one who isn't — or at what price. There is no fair answer to that question invented after the fact, only a negotiated one, and by then nobody is feeling negotiable.
If you don't write one, your state writes one for you
Every state has a default LLC statute that fills the gaps. Those defaults are reasonable general-purpose rules, and they are not tailored to you. Depending on the state, they may split profits per capita rather than by contribution, require unanimous consent for decisions you assumed were routine, or give a departing member rights the remaining members would never have agreed to.
So the choice isn't between having rules and not having them. It's between rules you chose and rules a legislature chose for the average case.
The single-member case, which people assume is pointless
If you're the only owner, there's nobody to negotiate with, and the agreement can be a couple of pages. It's still worth having, for one reason that has nothing to do with disputes: it's evidence that the company is a real, separate thing.
When somebody argues that a single-member LLC is just its owner wearing a hat — which is the argument for piercing the veil — the operating agreement, the separate bank account and the filed annual reports are what you point at. A company with none of the three looks a lot like a personal account with paperwork attached.
Practically, it should name the company and the state, say you're the sole member, record what you contributed, state that you have authority to act for the company, and say what happens to your interest if you die. That's most of it.
Who asks to see it
Banks, when you open a business account, particularly if there's more than one member or if the person at the counter wants to know who's authorised to sign. Lenders and the SBA, as part of underwriting. Investors and buyers, first thing, in diligence. Payment processors sometimes. Occasionally a landlord on a commercial lease.
Nobody asks for it when things are calm. Every one of those requests arrives attached to something you want — money, premises, an exit — and a missing agreement turns a formality into a delay.
Template or lawyer
A template is genuinely fine for a single-member LLC, and for a straightforward multi-member company where everyone put in the same amount, does the same amount, and owns the same share. We include one free with every formation for that reason.
Pay a lawyer when the shares aren't equal, when one person is contributing money and another is contributing work, when somebody outside is investing, when there's intellectual property that existed before the company, or when the members already disagree about something. A template applied to an uneven deal doesn't record the deal; it flattens it, and it flattens it in whatever direction the template's author assumed.
Common questions
No. It's an internal document that lives in your records. States that require you to have one still don't want a copy.
Yes, and for a single-member company that's a normal thing to do. It has to be signed and dated by the members and kept somewhere you can find it. What makes it binding is agreement between the members, not a filing or a notary — though notarising costs nothing much and removes an argument later.
Yes. Amendments follow whatever process the agreement itself sets out, which is usually a written amendment signed by the members. Write that process in while everyone still agrees on it.
Nothing bad happens on day one without it. It becomes worth having the first time somebody asks whether the company is genuinely separate from you — a bank, a court, or a buyer — and that's not a moment you can prepare for retroactively.
Then your state's default statute governs, and you're negotiating in its shadow rather than your own. It's still worth writing one now, and that's the point at which a lawyer is usually cheaper than the alternative.
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