Where to File an LLC Operating Agreement

By Jeffry Olson, J.D.

Where to File an LLC Operating Agreement

By Jeffry Olson, J.D.

An operating agreement for an LLC establishes the company's ownership and management responsibilities. It sets out financial and operational relations among members and between members and management of the LLC. Despite being an important and worthwhile part of starting a company, an operating agreement is not a document that states require LLCs to file. Instead of filing this document with the Secretary of State, companies should keep their written and signed operating agreements with other important LLC documents.

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States that Require Operating Agreements for LLCs

The following states require some form of an operating agreement:

  • California
  • Delaware
  • Maine
  • Missouri
  • New York

The requirements for the operating agreement vary by state. Some states require the operating agreement be in writing, some allow them to be oral, some expect LLCs to draft them immediately, and some allow the drafting of an operating agreement to occur at any time following the creation of the LLC.

Why Operating Agreements Are Beneficial

A properly drafted operating agreement helps protect a company's limited liability status by providing members protection from personal liability to the LLC. Even in states that do not require operating agreements for LLCs, there are numerous reasons to use a written operating agreement.

The operating agreement replaces default provisions otherwise provided by the state. Each state outlines default rules for LLCs that do not have signed operating agreements. It is never advisable to rely on state statutes for the management of an LLC.

Misunderstanding and miscommunication can take place when parties agree on oral terms, so a written operating agreement clarifies verbal agreements. Having key operational conditions and all other business agreements in writing allows the parties to use the operating agreement to resolve disputes.

Drafting Operating Agreements for LLCs

When things for an LLC progress smoothly, members rarely need to rely on the terms of the operating agreement. However, when things become more difficult or a company faces an unexpected or unusual predicament, an operating agreement can help resolve problems and allow the members to move forward. Ideally, the members of an LLC draft an operating agreement immediately upon forming the company. If necessary, they can amend the operating agreement in the future.

Operating agreements often include decisions made between members regarding the following topics:

  • Distribution of profits and losses
  • Member ownership percentages
  • Member voting rights and responsibilities
  • When and how to hold meetings
  • Powers and responsibilities of both members and managers
  • Rules for transferring interests

Members of the LLC should sign the operating agreement, preferably at the same time, and have the document notarized. Signing the document at the same time in the same place prevents members from denying knowledge of the agreement's existence in the future.

Filing an LLC Operating Agreement

Every LLC should have a written operating agreement, preferably upon creation of the LLC. It is easier for members to agree on terms in the beginning. Verbal agreements are not enough and can cause problems when conflicts arise. LLCs should keep their signed operating agreements with other vital company documents. None of the 50 states require the filing of LLC operating agreements with the Secretary of State or any other state agency.

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