What is an LLC operating agreement?

An LLC operating agreement is the internal contract among the members (owners) of a limited liability company that sets out how the company is owned and run: who owns what percentage, how decisions are made, how profits and losses are split, how money goes in and comes out, and what happens if a member leaves, dies or wants to sell. It is not filed with the state in most cases — it is kept privately by the company — but it governs the LLC's actual operation.

Does a single-member LLC need an operating agreement?

Yes, even though only one person is involved. A single-member operating agreement reinforces the legal separation between you and the company, which helps preserve the liability shield (it is evidence the LLC is a real, distinct entity). Banks often ask to see one before opening a business account, and it lets you override unhelpful default state rules. It is short and simple for a single member, but you should still have one.

Is an operating agreement legally required?

It depends on the state. A handful of states — including California, New York, Missouri and Delaware (for some purposes) — legally require LLCs to have an operating agreement, though they generally do not require you to file it. Most states do not require one at all. Regardless of the legal requirement, every LLC should have one, because without it the company is governed entirely by the state's default rules, which may not suit you.

Can I write my own operating agreement or use a template?

For a straightforward single-member LLC or a simple multi-member LLC with equal partners, a good template is usually fine, and many formation services include one. For anything more complex — unequal ownership, outside investors, special profit allocations, vesting, or buy-sell arrangements — have an attorney draft or review it. A cheap template that gets the buy-out or dispute clauses wrong is far more expensive than a lawyer when a partnership breaks down.

Do you file an operating agreement with the state?

Generally no. Unlike the articles of organisation (which create the LLC and are filed publicly), the operating agreement is an internal document kept with your company records. You will, however, be asked to produce it by banks, lenders, investors, and sometimes during legal or tax matters, so keep a signed copy accessible.

What happens if an LLC has no operating agreement?

The LLC is governed entirely by the default LLC statute of its state. Those defaults decide profit splits (often equal regardless of contribution), voting, management and what happens when a member exits — and they frequently do not match what the owners actually intended. With no agreement, a dispute or a member's departure can force outcomes nobody wanted, and in the worst case can trigger dissolution under state law.

LLC Operating Agreement: What It Is & What to Include (2026)

The operating agreement is the most important LLC document that the state never sees. It is not what creates your company — that is the articles of organisation — but it is what governs how the company actually runs, and the gap between "we filed an LLC" and "we have a real, well-run LLC" is exactly this document. This guide explains what an operating agreement is, why even a one-person LLC needs one, and the specific clauses every agreement should contain. Written for US LLC owners, including non-residents who form a US LLC.

Soveraine recommends

Northwest Registered Agent — LLC formation that includes a free operating-agreement template and registered agent.

What an operating agreement actually is

An LLC operating agreement is the internal contract among the owners (called members) of a limited liability company. It sets out ownership, management, money and exits. Three things distinguish it from the other LLC paperwork:

It is not usually filed with the state — it is kept privately in your company records.
It governs the real operation of the company, overriding the state's one-size default rules.
It is the document banks, lenders and investors ask to see to confirm who controls the company.

Think of the articles of organisation as your LLC's birth certificate and the operating agreement as its rulebook.

Articles of organisation are filed with the state; the operating agreement is kept internally — The articles create the LLC; the operating agreement **runs** it.

Why even a single-member LLC needs one

It is tempting to skip the agreement when you are the only owner. Don't. For a single-member LLC the operating agreement does three useful things:

Reinforces the liability shield. A documented agreement is evidence that the LLC is a genuine, separate entity — part of what stops a court "piercing the veil" and reaching your personal assets.
Satisfies the bank. Many US banks ask for an operating agreement before opening a business account, including for non-resident-owned LLCs.
Overrides unhelpful defaults. It lets you set your own rules for succession, management and dissolution rather than accept the state's.

A single-member agreement is short — often a few pages — but it should exist and be signed.

What to include — the core clauses

Every operating agreement, single- or multi-member, should cover:

The members and their ownership percentages — who owns what.
Capital contributions — what each member put in (cash, property, services) and what happens if more is needed.
Management structure — member-managed (owners run it) or manager-managed (a designated manager runs it).
Voting rights — how decisions are made and what supermajorities apply to big decisions.
Profit and loss allocation and distributions — how money is split and when it is paid out (this need not match ownership percentages, but say so explicitly).
Transfer and buy-sell provisions — what happens if a member wants to sell, dies, becomes disabled, or is bought out.
Dissolution — how the company is wound up and assets distributed.
Amendment procedure — how the agreement itself can be changed.

Core operating agreement clauses: ownership, contributions, management, profit split, buy-sell, dissolution — The clauses that prevent the disputes nobody plans for.

The buy-sell and exit clauses are the ones people skip and later regret. A partnership that splits up without a pre-agreed buy-out mechanism is where most LLC disputes turn ugly and expensive.

Template vs lawyer

A template is fine for a single-member LLC or a simple multi-member LLC with equal partners and ordinary terms. Most reputable formation services — including Northwest and Doola — include a usable template.
Use a lawyer when there is unequal ownership, outside investment, special profit allocations, vesting schedules, or anything where a future dispute could be costly. The fee is small next to the cost of an ambiguous buy-out clause.

When a template is enough versus when to use a lawyer for an operating agreement — Simple and equal: template. Complex or investor-facing: **lawyer**.

Forming the LLC too?

Doola bundles formation, EIN and an operating-agreement template — handy for non-resident founders.

Common mistakes

No agreement at all. The LLC then runs on the state's defaults, which rarely match what the owners wanted — see sole prop vs LLC for why the structure matters.

Copying a template without reading it. Generic templates often allocate profits equally and omit buy-sell terms. Adapt it to your facts.

Never signing it. An unsigned agreement is weak evidence. Sign, date and keep a copy with your records.

Letting it go stale. Update the agreement when ownership, management or contributions change.

When to consult a qualified professional

Have an attorney draft or review your operating agreement if you have outside investors, unequal owners, special allocations, vesting, or significant assets at stake. For a simple single-member or equal-partner LLC, a quality template is usually sufficient.

Soveraine is an editorial publication, not a law firm. Read our editorial policy and disclaimer before acting on anything in this article.