How to Draft LLC Operating Agreements

By Lauren Miller

An operating agreement for a limited liability company (LLC) sets the parameters for how the company conducts business, how it is managed, how profits and losses are handled and other items. States have various requirements regarding operating agreements. Some require that LLCs with more than one member create an operating agreement. However, other states only recommend creating the document. Depending on the state law, agreements may be oral or written.

Compiling Operating Agreement Content

Step 1

Create a list of the items to include in an operating agreement. The Citizen Media Project at Harvard Law School provides a guide for creating an operating agreement (see References).

Step 2

Create a blank document in a word processing program for typing the information needed for a draft of your operating agreement. Use a sample agreement as a guide for formatting and organization (see Resources).

Ready to start your LLC? Start an LLC Online Now

Step 3

Type the name, initial registered office and principal office of the LLC as the first items in your document. The parts of the document can be called chapters, sections or any other segment title you prefer.

Step 4

Write a statement explaining that the agreement is in accordance with state law and commences after the proper LLC documents have been filed with the state.

Step 5

State the purpose of the LLC. This should include a short statement about the exact nature of the LLC’s business.

Step 6

Write a paragraph that explains the management structure of the LLC. LLCs are either member-managed or manager-managed. In a member-managed company, any member can make business decisions on behalf of the LLC. In a manager-managed arranged, the members elect managers to make business decisions.

Step 7

Type the names and addresses of the founding members and the managers. Include the titles of the elected managers such as president, vice-president, treasurer.

Step 8

Write a section on rules and vote-taking during meetings. Use a sample LLC operating agreement as a guide (see References).

Step 9

Write a section detailing the initial capital contributions of all members. If this is long, include an appendix with in-depth details. Include information on the obligations of members to make future contributions and if members are entitled to interest on contributions.

Step 10

Write a section on how profits and losses are allocated among members. The section may include information on the frequency of distributions and also information on how the company chooses to be taxed. The IRS allows LLCs a choice of being taxed as a partnership, corporation or sole proprietorship.

Step 11

Write a section on how interest is transferred among members including buy-out provisions and the policies for adding new members.

Step 12

Write a section detailing a dissolution policy for the LLC. This can include information on what percentage of member votes are needed in order to dissolve the company.

Step 13

Create a section that includes the signature and date of each member.

Step 14

Add appendix material as needed to expand upon details in the agreement sections.

Ready to start your LLC? Start an LLC Online Now
How to Add an Entity to an Existing LLC



Related articles

How to Incorporate a Business in North Carolina

Incorporating a business in North Carolina is done by filling out the Articles of Incorporation and filing the document with the North Carolina Department of the Secretary of State. The Articles of Incorporation must contain certain information, including the corporation's name and address, the registered agent's name and address, and the names and addresses of the incorporators. Additional provisions may be added, such as the names of the initial directors or the initial purpose for which the corporation is being organized, provided they comply with § 55A-2-02 of the North Carolina General Statutes.

How to Compare an LP & an LLC

One of the biggest decisions involved in starting a business is deciding on a business structure. Limited liability companies, or LLCs, and limited partnerships, or LPs, share similar characteristics and may be attractive to some business owners. Comparing features of the two types of business structures can help you decide which one best suits your needs. Both LLCs and LPs are entities separate from their owners.

How to Document Members in a Limited Liability Company

The owners of a limited liability company, or LLC, are known as members. Unlike a corporation, where ownership is represented by holding shares of stock, an LLC maintains a record of ownership through internal record keeping. Each member is allocated a capital account on the company's books that is the original amount of money, property and services a member contributed to capitalize his ownership interest, plus or minus any additions or withdrawals made to the account over time. An LLC has a legal duty to maintain an accurate accounting of members and each member's capital account for tax purposes.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

How to Change Name of an LLC in California

In California, the main document needed to form a limited liability company is called the articles of organization. If ...

How to Become a Partner of an LLC

A Limited Liability Company (LLC) may seek the addition of a new member (as LLC owners are called) in order to benefit ...

How Do I Add Another Owner to My LLC?

The passage of time can bring about waves of change in the operations of any business. Shifts in market conditions, ...

How to Remove an Officer From Articles of Incorporation

A corporation is organized under state law by filing articles of incorporation that specifically conform to the state's ...

Browse by category
Ready to Begin? GET STARTED