What is an LLC operating agreement?
An operating agreement, which Delaware's law calls a limited liability company agreement, is the contract among an LLC's members, or with its only member, about how the company runs. State LLC laws supply default rules, and the agreement can replace many of them with terms you choose. Wyoming's law, for example, says the agreement governs relations among members, management and voting rights, transfers and distributions, and that the statute applies only where the agreement is silent.
It's separate from your articles of organization (a certificate of formation in Delaware), the short public filing that creates the LLC. The articles put the company's name and registered agent on the public record. The operating agreement holds the private details.
Is it filed with the state?
No. It's an internal document that you sign and keep with your records. New York's Department of State, for example, describes the operating agreement as an internal document of the LLC that is not filed with it. Keep the signed copy somewhere safe, because a bank, investor or court may ask to see it.
Does your state require one?
| State | What the law says | Must it be written? |
|---|---|---|
| New York | Members must adopt a written operating agreement before, when or within 90 days after filing the articles of organization | Yes |
| Delaware | An LLC agreement must be entered into or otherwise exist, before, at or after formation | No: it can be oral or implied |
| Maine | An LLC agreement must be entered into or otherwise exist | No: it can be oral or implied |
| Wyoming | The agreement can be oral, in a record, implied or a mix, including with a sole member; the statute fills any gaps | No |
Even where a written agreement isn't required, going without one means state default rules decide your ownership split, voting and exits, and those defaults may not match what you and your co-founders agreed. Check the LLC statute in your formation state, or ask a lawyer there. If you haven't picked a state yet, see the best state for an LLC as a non-resident.
Why banks and payment processors ask for it
Under FinCEN's customer due diligence rule, a US bank must identify and verify every person who owns 25% or more of a business customer, plus one person who controls it. In Wyoming and Delaware, the formation filing doesn't name the owners, so the operating agreement is a natural way to show them. It can also show who may open accounts and sign for the LLC.
Payment processors run their own checks and make their own decisions, and nobody can guarantee approval. Keep the names, percentages and addresses in your agreement consistent with your EIN application and other documents, so what you tell each provider matches. See opening a US bank account as a non-resident and Stripe for a US LLC.
What to include in an LLC operating agreement
A useful operating agreement covers these six topics. For each, here's what it decides and what the default rules say if you leave it out.
1. Ownership and members
List each member and their percentage interest, and say how percentages are set, for example by capital contributed or simply by agreement. A single-member agreement names the sole member as owning 100%.
2. Capital contributions
Record what each member put in, such as cash, equipment or intellectual property, its agreed value and whether anyone must contribute more later. This matters because Delaware's default rule shares profits, losses and distributions by the agreed value of contributions stated in the LLC's records.
3. Management and voting
Say whether the LLC is member-managed (the owners run it) or manager-managed (appointed managers run it), and which decisions need a majority, a supermajority or everyone. Without an agreement, Wyoming gives each member of a member-managed LLC equal management rights, while Delaware gives control to members owning more than 50% of the profits interest. Name who can sign contracts and open bank accounts.
4. Profits, losses and distributions
Set how profit and loss are allocated and when cash is paid out. Defaults differ: Wyoming shares distributions equally among members unless an agreement or the LLC's IRS filings say otherwise, and Delaware uses the agreed value of each member's contributions. A multi-member LLC taxed as a partnership should also cover cash for members' taxes, its partnership representative for IRS audits and who prepares Form 1065.
5. Transfers and new members
Decide whether members can sell or give away their interest, whether the others get a right of first refusal and how new members are admitted. Under Delaware's default rule, someone who receives a member's interest gets its economic rights but doesn't become a member without the other members' consent.
6. Exits, deadlock and dissolution
Cover what happens if a member dies, becomes incapacitated, wants out or stops working in the business, including how their interest is valued and paid for. Add a way to break a deadlock between equal owners. Then say how the LLC is dissolved. Without an agreement, Wyoming needs every member's consent to dissolve and Delaware needs members owning more than two-thirds of the profits interest; both pay creditors before members. How to close a US LLC explains the process.
Other clauses worth adding
- Records: the tax year, where books are kept and who can inspect them.
- Banking: who can open accounts and sign, and whether large payments need two approvals.
- Indemnification: whether the LLC covers members' and managers' legal costs.
- Governing law and disputes: usually your formation state's law, plus arbitration or a named court.
- Amendments: how the agreement itself can be changed.
Single-member vs multi-member operating agreements
A single-member agreement is shorter but still worth signing. It shows banks that you own 100% and control the LLC, says what happens to the company if you die or become incapacitated, and documents that the LLC is a business separate from you. Delaware's law states that a one-member LLC agreement isn't unenforceable just because only one person is a party to it.
A multi-member agreement does more work, because it settles disagreements before they happen. Spend the time on contributions, profit splits, decision rules, buyouts for a founder who leaves and deadlock. If members live in different countries, add how you'll sign documents and hold meetings remotely.
| Criteria | Single-member | Multi-member |
|---|---|---|
| Ownership | Sole member owns 100% | Each member's percentage and how it can change |
| Management | You manage it, or appoint a manager | Who decides what, and the voting thresholds |
| Money | How and when you take money out | Allocation of profit and loss, and cash distribution rules |
| Transfers | What happens to your interest if you die or become incapacitated | Transfer limits, first-refusal rights and admitting members |
| Tax clauses | Disregarded entity; records for Form 5472 | Form 1065, Schedules K-1, partnership representative, withholding for foreign members |
| Deadlock and buyouts | Buy-sell terms, valuation and a deadlock process |
The tax side of that choice is covered in single-member vs multi-member LLCs for foreign owners.
How to create and sign your operating agreement
Start from the right template
Pick one that matches your formation state and whether you have one member or several, then fill in names, percentages and contributions.
Agree on the business terms first
Co-founders should settle contributions, splits, roles and exits before anyone signs. Pay for a lawyer when the terms are complex or the sums are large.
Sign and date it
Every member signs. If you sign electronically, confirm that your bank accepts e-signed copies.
Store it with your company records
Keep the signed copy with your articles of organization, EIN confirmation and annual reports, ready for a bank, payment processor or investor.
Amend it when things change
Sign an amendment when members join or leave, percentages change or you switch between member-managed and manager-managed.
Our Starter plan includes an operating agreement, stored with your formation documents in your document vault. We're not a law firm, so for unusual terms, such as investor rights, vesting or complex profit splits, have a US lawyer review it.
Common operating agreement mistakes
- Not having one, and leaving splits, votes and exits to state default rules.
- Percentages that don't match reality, such as 50/50 on paper when one founder put in all the money.
- A template from another state with clauses nobody read.
- Forgetting to amend it after a member joins, leaves or changes their stake.
- Terms that clash with a tax election, such as unequal distribution rights in an LLC taxed as an S-corp. See LLC vs S-corp.
Frequently asked questions
Is an LLC operating agreement legally required?
Do I file my operating agreement with the Secretary of State?
Does a single-member LLC need an operating agreement?
Can I write my own operating agreement?
What happens if we don't have an operating agreement?
Do I need to update the agreement when members change?
Sources
- New York Department of State, forming a limited liability company
- New York Limited Liability Company Law § 417
- Delaware Code Title 6, § 18-101 (limited liability company agreement defined)
- Delaware Code Title 6, § 18-201 (agreement must exist)
- Delaware Code Title 6, § 18-402 (default management)
- Delaware Code Title 6, §§ 18-503 and 18-504 (default allocations and distributions)
- Delaware Code Title 6, § 18-702 (assignment of interests)
- Delaware Code Title 6, §§ 18-801 and 18-804 (dissolution and distribution of assets)
- Maine Revised Statutes Title 31, § 1531 (agreement must exist)
- Maine Revised Statutes Title 31, § 1502 (definitions)
- Wyoming Statutes Title 17, §§ 17-29-102, 17-29-110, 17-29-404, 17-29-407 and 17-29-701
- FinCEN, Customer due diligence final rule
Facts checked on September 17, 2026 against the sources above. Rules and fees change, so confirm anything important with the official source. Register Quick LLC is not a law firm or CPA firm, and this page is general information, not legal or tax advice.
