Home › Start an LLC › Operating Agreement
LLC Operating Agreement: What It Is and What to Include
An operating agreement is the rulebook of your LLC. Even when your state does not require one, banks, payment platforms and partners often ask to see it. Here is what it covers, what to include and how it works for LLCs owned from outside the US.
An LLC operating agreement is an internal document that sets out who owns the LLC, how it is run and what happens if an owner leaves. It is not filed with the state. A few states require every LLC to have one, and in practice banks, Stripe and business partners often ask for it, especially when the owners live abroad. Every LLC, including a single-member LLC, should have one.
What Is an LLC Operating Agreement?
The Articles of Organization create your LLC with the state. The operating agreement explains how that LLC works on the inside: who the members are, what share each owns, who makes decisions and how money is paid out. It is signed by the members and kept with your company records.
Without one, your LLC follows the default rules of its state, which may not match what you and your partners actually agreed.
Is an Operating Agreement Required?
A few states, including California, Maine, Missouri and New York, require every LLC to have an operating agreement. Most other states do not require it by law. But “not required” does not mean “not needed”:
- Banks and fintech providers may ask for it to confirm who owns and controls the LLC
- Payment platforms such as Stripe may ask for ownership documents during verification
- It proves the LLC is separate from you, which supports your liability protection
- It prevents disputes between partners about money, roles and exits
What to Include in an LLC Operating Agreement
- Basic details: the LLC’s name, state, address and date of formation
- Members and ownership: each member’s name and percentage of ownership
- Capital contributions: what each member put in, in money or work
- Management: member-managed or manager-managed, and who can sign for the LLC
- Voting: how decisions are made and what needs everyone’s approval
- Profits and losses: how profit is shared and when distributions are paid
- Tax treatment: how the LLC is taxed and who handles filings
- Adding or removing members: how new owners join and how shares are transferred
- Death or exit of a member: what happens to their share
- Dissolution: how the LLC is closed and assets are divided
Single-Member vs Multi-Member Operating Agreements
| Point | Single-member LLC | Multi-member LLC |
|---|---|---|
| Main purpose | Prove the LLC is separate from you | Set the rules between partners |
| Ownership | One owner holds 100% | Shares split between members |
| Key sections | Management, banking, succession | Voting, profit split, buy-out, disputes |
| Tax default | Disregarded entity | Partnership |
For a single-member LLC, the agreement is short but still useful. It shows a bank or platform that you own 100% of the company and are authorised to act for it, and it names who takes over if something happens to you.
Operating Agreements for LLCs Owned From Abroad
If you live outside the US, an operating agreement does extra work for you. Verification teams often cannot check foreign owners as easily as US owners, so a clear signed document showing ownership and control can make account approvals smoother. Make sure the names, spelling and ownership percentages match your passport, Articles of Organization and EIN records exactly.
Common Operating Agreement Mistakes
- Using a template that does not match how your LLC is actually taxed
- Names or percentages that do not match the state and IRS records
- Not updating it when a member joins or leaves
- Leaving out what happens if a member dies or wants to sell
- Never signing it, or losing the signed copy
How LLCPronto Can Help
We form your US LLC with the state fee, registered agent, EIN within 24 hours and US mailing address in one price from $190. Need an operating agreement for a single-member or multi-member LLC? Message us on WhatsApp and our team will help you with it.
How to Create an LLC Operating Agreement
- Record ownership: list each member, what they contributed and their percentage
- Choose management: member-managed or manager-managed, and who can sign contracts and open accounts
- Set voting rules: what needs a simple majority and what needs everyone
- Set the money rules: how and when profit is paid out, and how losses are shared
- Plan exits: what happens if a member leaves, sells, dies or the LLC closes
- Sign and store it: every member signs, and you keep the signed copy with your company records
Member-Managed vs Manager-Managed
| Point | Member-managed | Manager-managed |
|---|---|---|
| Who runs the business | All members | Appointed managers |
| Best for | Solo founders and active partners | LLCs with silent investors |
| What the agreement must cover | Each member’s authority | Managers’ duties, pay and how they can be removed |
Clauses Partners Often Forget
- Right of first refusal: existing members get the first chance to buy a leaving member’s share
- Buy-sell terms: how a share is valued and paid for
- Deadlock: what happens when 50/50 partners disagree
- Non-compete or confidentiality: if members could run a competing business
- Dispute resolution: mediation or arbitration before going to court
Operating Agreement vs Bylaws
An operating agreement is the rulebook for an LLC. A corporation uses bylaws for the same job. If your LLC later becomes a corporation, it will need bylaws instead. See LLC vs Inc.
Keep It Matching Your Other Records
Banks and payment platforms compare your operating agreement with your Articles of Organization, EIN records and passport. Names, spelling, addresses and ownership percentages must match everywhere, or verification can be delayed.
Operating Agreement Checklist
| Section | What to write |
|---|---|
| Company details | Legal name, state, file number, address, registered agent |
| Members | Names, addresses, ownership percentages, contributions |
| Management | Member- or manager-managed; who signs and banks |
| Money | Profit split, distributions, reinvestment rules |
| Tax | Default treatment or an election, and who files the forms |
| Changes | Adding members, transfers, right of first refusal |
| Endings | Death, exit, deadlock and dissolution |
Single-Member Operating Agreement: What to Focus On
- A clear statement that you own 100% of the LLC
- That you alone can open accounts, sign contracts and act for the company
- That the LLC is separate from you and its money is kept separate
- Who takes over the LLC if something happens to you
- How the LLC is taxed (disregarded by default)
These points are what banks and payment platforms look for when they ask about ownership and control.
LLC Operating Agreement: FAQs
What is an LLC operating agreement?
An internal document that sets out who owns the LLC, how it is managed and how profit, decisions and exits are handled.
Do I need an operating agreement for a single-member LLC?
It is strongly recommended. It shows banks and platforms that you own and control the LLC and supports your liability protection.
Is an operating agreement filed with the state?
No. It is kept with your company records and shown to banks, platforms or partners when they ask.
Which states require an operating agreement?
A few, including California, Maine, Missouri and New York, require one. Most states do not require it by law, but it is still good practice.
Can I change my operating agreement later?
Yes. Members can amend it at any time, following the amendment rules written in the agreement itself.
Does Stripe or a bank ask for an operating agreement?
They may. During verification, banks and payment platforms often ask for documents that show who owns and controls the LLC.
What happens if my LLC has no operating agreement?
The LLC follows your state’s default rules, which may not match what the owners agreed and can cause disputes.
Can I write my own operating agreement?
Yes. Many single-member LLCs use a standard agreement. For partners, complex profit splits or investors, it is worth having it reviewed.
Is an operating agreement the same as bylaws?
No. LLCs use operating agreements; corporations use bylaws. They do a similar job for different types of company.
Related Guides
- What is an LLC?
- Single-member LLC
- Business bank account for your LLC
- Stripe and PayPal for a US LLC
- How to start an LLC
Form Your LLC the Right Way
State fee, registered agent, EIN in 24 hours and US mailing address from $190. Ask us about an operating agreement on WhatsApp.
Start My LLCAsk on WhatsApp