Is an Operating Agreement for an LLC Public Record?

By Laura Payet

Is an Operating Agreement for an LLC Public Record?

By Laura Payet

Unlike the articles of organization with a limited liability company (LLC), which the company must file with the state, its operating agreement does not need to be on file with any state agency and is not a public record. This document is a contract drafted by the owners of an LLC that establishes the framework for the company's operation. Although not all states require a written one, it's good practice to have one.

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An Operating Agreement's Provisions

Having one allows an LLC's owners, known as members, to write the rules governing the company's management and operation. Some of the topics a comprehensive operating agreement might cover include:

  • Names of all the members
  • Name of the person responsible for managing the company
  • Each member's ownership interest
  • How the members divide profits and losses
  • How to add or remove members
  • What happens if a member dies or files for bankruptcy
  • How to amend the document
  • How to take votes
  • When and whether members have regular meetings

The agreement should be in writing and signed by all the members to minimize disputes about its provisions and help the business run smoothly. Keep it with the company's important business records. It may be wise to have a copy at the company's primary place of business or registered agent's address.

Reasons to Have an Operating Agreement

Aside from the benefit of having a clear road map for all members to agree upon and follow, there are additional reasons to have an operating agreement:

  1. Some states require every LLC to have one. These states include New York, California, and Delaware, among others.
  2. Absent an agreement, state law controls how the business adds and removes members. In some states, unless the document provides otherwise, an LLC must dissolve when a member leaves, dies, or declares bankruptcy.
  3. Banks may require an operating agreement before it can open an account. Lenders and investors may also require one to be sure the company runs responsibly before agreeing to provide funds.
  4. A court may choose to allow a business creditor or injured plaintiff to seek recovery from the members as individuals if the business lacks an agreement. A court may permit this practice, called "piercing the corporate veil," when members do not strictly separate their personal finances from the company's. Without one, the court may not recognize the company as a separate legal entity from its members.

Privacy for LLC Members

Some business owners may prefer to be silent partners not named in a company's documentation. Although no state requires that it to be public record, some states require an LLC to identify its members in its articles of organization, which the state keeps on file and makes available to the public. In these states, which include Connecticut, Florida, and New Jersey, it may be impossible for members to remain completely anonymous.

If your business needs an operating agreement, or if your current document needs improvement, you should sit down with the other members and determine what needs to be changed. If additional changes need to be made in the future, ensure that all members agree to and sign the updated agreement.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.