Do you need an operating agreement?

What does an LLC operating agreement cover?

An operating agreement records how the owners (called members) run the company and divide its money. It is usually signed by the members and kept with the LLC's records.

Most agreements answer the same set of questions. A short one for a single owner may fit on a few pages, while one for several partners usually runs longer because there is more to settle.

• Who the members are and what each contributed, in cash, property or work
• Each member's ownership share and how profits and losses are allocated
• Whether the members manage the LLC themselves or appoint managers
• How votes work, and which decisions need everyone's consent
• How a new member is admitted and how a member sells or leaves
• What happens if a member dies, becomes unable to take part or wants out
• How the LLC is dissolved and how remaining assets are divided

ZenBusiness's product card puts it in one line: the document outlines the structure and ownership for your company. Everything in the list above is a detail of that structure.³

Where an agreement is silent, the state's LLC law may supply default rules. Those rules aren't part of our state records, so this guide doesn't list them. An agreement lets the members set their own terms.

Do you have to file an operating agreement with the state?

The state filings we track are the formation document and a recurring report, and the report contents we hold list names and addresses rather than the agreement itself. Whether a given state asks for the agreement isn't something we record.

The formation filing has different names. Texas calls it the Certificate of Formation to Limited Liability Company (Form 205), Delaware the Certificate of Formation, California the Articles of Organization (Form LLC-1) and New York the Articles of Organization (DOS-1336-f). The formation document creates the LLC; the operating agreement covers how it runs and is a separate, internal document.^{1, 2, 5, 6}

Some recurring reports do overlap with what an agreement records. Texas's Public Information Report asks for all managers (and all members if member-managed), plus the address where the entity's records are kept. California's Statement of Information lists managers or members, and Florida's annual report asks for the name, address and title of each manager or managing member. If the agreement changes who manages the company, the next of these reports lists the new names.^{7, 8, 9}

Tennessee is a case where membership affects the state fee directly. Its formation fee is $50 per member, $300 minimum, $3,000 maximum, so the number of members changes what the state charges.¹⁰

New York adds a step after formation, a notice in two newspapers chosen by the county clerk, unrelated to the agreement; the New York LLC guide explains it. Each state formation guide lists that state's filings in order, and the step-by-step LLC guide shows where the agreement fits among them.⁶

Whether a particular state's statute requires an LLC to adopt an agreement at all is a separate question. We haven't recorded that for each state yet; the state's LLC statute is the source, and a lawyer licensed there can answer it for a given company.

Does a single-member LLC need an operating agreement?

The filings we track don't include it, but a single owner may still write one to show the LLC is run as a business separate from its owner.

The SBA's summary of the LLC form is that an LLC protects owners from personal liability in most instances, and profits and losses can pass through to personal income without corporate taxes. That separation is easier to show on paper when the company has its own records, its own bank account and a signed agreement saying the owner acts for the LLC.¹¹

The agreement doesn't set the tax treatment. The IRS rule is that a single-member LLC is disregarded as separate from its owner by default, and an LLC can file Form 8832, Entity Classification Election to elect a different classification. The single-member vs multi-member guide covers the tax side in depth.^{12, 13}

A single-member agreement is short. It names the owner, says the owner holds the whole interest, sets out who may sign for the company, and states what happens to the LLC if the owner dies.

Why do LLCs with several members need one more?

With more than one member, the agreement is the main written record of how profits split and how disputes or exits are handled, and the IRS treats the LLC as a partnership by default.

The IRS rule is that a domestic LLC with at least two members is a partnership by default, and such an LLC files Form 1065, U.S. Return of Partnership Income. The agreement sets the allocation that return reports. If two members put in unequal money, or one works in the business and the other doesn't, the agreement is where the split is decided.^{13, 14}

Exits cause the most trouble when nothing is written down. A buyout price formula, a right of first refusal on a member's share, and a rule for a deadlocked vote are common clauses. A template gives the headings; the members still have to fill in the terms they actually agree on.

A plan template suits a simple setup. Partners with uneven contributions, outside investors or a planned sale may want a lawyer to draft or review the agreement.

Which LLC formation plans include an operating agreement?

The plans below list an operating agreement or a template among their items. At some providers, such as ZenBusiness and Bizee, the entry tier leaves it out and the add-on price applies there.

Sold separately: Tailor Brands Included in Essential and Elite; not in Lite; LegalZoom Starts at $99; Bizee (formerly Incfile) +$99; ZenBusiness $99 one-time template (included in Pro and Premium); Swyft Filings Included in Standard (and Premium, which includes everything in Standard); doola Included in formation step; Inc Authority $89; Northwest Registered Agent Free template; BizFilings Sample operating agreement in Compliance Kit & Seal, $129 (included in Standard and Complete).

What each provider calls the item differs, and the wording hints at what you get.

ZenBusiness lists an "Operating agreement template" in its Pro and Premium plans. InCorp's own article says it includes basic operating agreement templates with its formation service. Northwest's plan lists "Operating agreement or bylaws", and Northwest says its standalone LLC operating agreement is not only free but written in plain language.^{15, 16, 17, 18}

Tailor Brands lists "Establish operating agreement" in its Essential and Elite plans; Lite doesn't list it. Bizee lists "Operating Agreement" in Standard and Premium, Swyft Filings lists "Operating agreement" in the same two tiers, and doola lists "Operating Agreement" in each of its plans.^{19, 20, 21, 22}

LegalZoom lists an operating agreement in its plans at $249 and $299; its entry plan at $0 doesn't list it.²³

A template you complete yourself and an agreement a provider prepares from your answers are different products. Providers don't always say which one a plan includes, so read the item description before you assume. The package contents guide shows which items each plan keeps for good and which are trials, and the full plan list puts every tier side by side.

How much does an operating agreement cost on its own?

Among the add-on prices we hold, an operating agreement runs from a free template at Northwest to $129 at BizFilings, where it comes inside a compliance kit.²⁴

• ZenBusiness charges $99 one-time outside Pro and Premium³
• Bizee adds it for $99 and includes it in Standard and Premium²⁰
• LegalZoom's agreements start at $99²⁵
• Inc Authority sells a custom agreement for $89⁴
• BizFilings includes a sample agreement in its compliance kit, sold for $129 and included in Standard and Complete²⁴

Comparing the add-on price to the jump between tiers is worth a minute. At ZenBusiness, Starter is $0 and Pro is $199, which then renews at $199/yr. Pro adds more than the agreement, such as an EIN, so the right choice depends on whether you want the other items.²⁶

Writing your own agreement costs nothing but time. Free templates exist, Northwest's among them, and a member can adapt one. The EIN guide covers the other document most new owners ask about, and the cost calculator adds a state's fees to each plan so you can see the full first-year price.

Where to go next

The operating agreement is one step after filing. For the rest, see how to form an LLC, the registered agent guide and the annual report guide. To compare services, start with the services that include an EIN, the plans for first-time founders and the most complete plans. How we rate explains the order of every list on this site.