Limited Liability Company (LLC) Operating Agreement Template

How Do I Write an Operating Agreement for an LLC?

Follow these instructions to compose an Operating Agreement for an LLC:

1. Describe the formation of the company and state the contributions of its members . You need to determine how much capital each member is entitled to, and the percentage of their ownership usually correlates with the number of their contributions. Identify the registered agent of the company, principal place of business, and purpose of your organization.
2. Specify how profits and losses are distributed among the members of the company . Profits and losses are shared based on distributive shares, not the capital percentage. It is possible to withdraw funds once a month, a quarter, twice a year, or whenever it is convenient.
3. Record the structure of the company . Appoint individuals responsible for the management of the organization and specify the duties of each manager.
4. Outline compensation for the members of the company and mention the reimbursement they will receive if they pay for any business-related expenses out of their own pockets.
5. Confirm that all transactions and profits will be recorded and maintained . Choose accounting methods and policies and comply with them consistently in case there is an audit in the future.
6. Figure out the procedure of the company dissolution - as soon as you start a business, you have to think about its liquidation which is usually conducted via the members' vote.
7. Establish the rules under which members are allowed to sell their shares of ownership and separate themselves from the company . As a follow-up to the Operating Agreement, it is highly recommended to prepare an LLC Buyout Agreement - this document will clarify how to process the departure of the company member.
8. Include a tax provision - you can operate as a partnership or sole proprietorship.
9. Decide when and how you can approve changes to the Operating Agreement.
10. Sign and date the agreement - all members of the company must appear in person to certify they agree with everything you put in writing.

States do not require LLCs to submit their Operating Agreements - retain them with other important documents and refer to them whenever you need to understand how to deal with financial and operational relations in your company.

How Much Does an LLC Operating Agreement Cost?

The cost of the LLC Operating Agreement is affected by the number of members in your organization, its plans for growth and investment, and the complexity of accounting operations that must be listed in full detail. You can seek the help of a professional lawyer who specializes in composing documents that stipulate managerial and financial rights and responsibilities of the LLC, and it will cost you anywhere between $300 and $5000. However, if you need a simple LLC Operating Agreement, you can manage without consultation and compose a proper document yourself including all the points and sections mentioned above.

How to Amend an LLC Operating Agreement?

Periodically, every LLC faces the necessity to modify something in their internal documentation - sometimes, it is required to change a single sentence. You should adhere to the procedure for making changes included in the agreement once it is first drafted. Generally, LLCs include a provision that requires 100% of the company members to agree to a change, but you can decide that a supermajority or majority of votes is enough to issue an amendment.

If you made a decision not to include the amendment clause in the Operating Agreement, simply comply with the state regulations - you may need unanimous approval of members or just a majority. Contact the Secretary of State office to learn the requirements for your location. Additionally, you can amend your LLC Articles of Organization to update information about your company available to the general public - file new documentation with the appropriate state agency to change the name of your company, physical or mailing address, or appoint a new registered agent for your organization.

Still looking for a particular template? Take a look at the related templates below:

• Partnership Agreement;
• Shareholder Agreement;
• Stock Purchase Agreement.