How to Write a Simple Operating Agreement
An Operating Agreement outlines how an LLC will be managed financially and operationally. It spells out member ownership percentages and capital contributions determining profit/loss distribution and voting rights. If your LLC is in California, Delaware, Maine, Missouri or New York, you need an operating agreement. Single-member LLCs in other states should also have one.
Filling Out Your Agreement
- List members and managers.
- Define ownership percentage and capital contribution amounts.
- Describe management structure – whether member or manager managed, voting and decisions.
- Include provisions protecting managers from member pressure about decisions.
Once established, the agreement governs business details for financial decisions, functions, provisions, regulations and more. To create one:
- Start an LLC.
- Understand state requirements.
- Have members sign to make it legal.
Should I write my own operating agreement?
A written operating agreement is a legal contract drawn up when forming a limited liability company (LLC). This agreement defines rules, processes, and provisions governing internal operations. Operating agreements differentiate LLCs from sole proprietorships, protecting personal assets. Written operating agreements are required in all fifty states to form an LLC.