Frequently Asked Questions

What is an Operating Agreement?

An LLC Operating Agreement is a legal document that establishes the rights and responsibilities of each LLC member and provides details about the LLC’s internal management, including how decisions are made, when meetings are held, how new members are admitted, and more.

What does an LLC Operating Agreement include?

The LLC Operating Agreement has information about the LLC itself, including the name, registered agent, office address, description of services and signing details. It also includes details about each member:

Name and address
Membership class (not often used and only relevant if more than one member)
Capital contribution
Percentage of ownership (only relevant if more than one member)
Share of profits and losses (only relevant if more than one member)

In a multi-member LLC the operating agreement can also document whether a member can voluntarily leave the LLC, if they can compete against the LLC after leaving, how assets are distributed if the company dissolves, and how new members are admitted.

The LLC Operating Agreement also specifies how the company will be managed, including how decisions will be made and if actions require a majority of members to vote in favor of decisions (referred to as unanimous consent).

An LLC can be managed either by a managing member (or members) or a designated manager(s).

Financial and administrative aspects of an LLC are defined in the operating agreement, including the LLC’s accounting methods, fiscal year, annual report details, and more.