An operating agreement records who owns the LLC, who runs it and how decisions are made. It also sets out what happens when an owner leaves, new money is needed or the business closes.
The articles or certificate filed with the state create the LLC. The operating agreement sets its internal rules.
What should the agreement cover?
Members are the LLC’s owners. Start with these decisions:
- Ownership: Who are the members, what does each contribute, and what interest does each receive?
- Management: Will the members run the LLC, or appoint managers? Who can sign contracts or borrow money?
- Voting: Which decisions can one person make? Which need a majority or unanimous approval?
- Money: How will profits be distributed, records kept and additional funding handled?
- Ownership changes: Can a member sell their interest? What happens on death, incapacity or departure?
- Disagreements and closure: How will deadlocks be resolved, and who can approve closing the company?
For example, two equal owners may agree on ownership but disagree about a major purchase. The agreement should explain who can approve it and how a tied vote is resolved. Writing “50/50 owners” alone does not answer those questions.
A single-member LLC can also use an agreement to document its ownership, management and signing authority.
Does it have to be written or filed?
State rules differ. New York requires a written agreement adopted before formation, at formation or within 90 days after filing the articles. Members keep it in the company records; they do not file it with the Department of State.
Missouri also distinguishes the internal agreement from the articles filed with the state. Check your state guide before sending private terms to a public filing office.
Use these questions to plan the agreement before drafting or signing it. They do not provide a ready-to-sign contract. State law limits some terms; unusual ownership, funding or tax arrangements may need legal and tax advice.
Does the agreement choose the LLC’s tax status?
No. Writing “S corporation” in the agreement does not make an IRS election. The IRS LLC guidance explains default tax treatment and elections.
Keep the agreement current
Save the signed agreement and every approved amendment. Update it when members, contributions, management or voting rights change. Check the agreement’s approval procedure before making those changes.
Use the starting checklist to track the agreement alongside formation, the EIN and banking. For the next stage, see what to do after forming your LLC.
