An operating agreement is your LLC's internal rulebook. It defines who owns what, how money gets split, how decisions are made, and what happens when things change. Most states do not require single-member LLCs to have one — and yet nearly every business attorney will tell you to write one anyway.

Here is why, and exactly what to put in it.

Why you need one (even solo)

1. It protects your liability shield. The whole point of an LLC is separating you from your business. Courts look for evidence that the LLC is a real, separate entity — and a signed operating agreement is one of the strongest pieces of evidence. Without one, a creditor can argue your LLC is just an alter ego.

2. Banks ask for it. When you open a business bank account, many banks request a copy of the operating agreement, even for single-member LLCs.

3. It prevents future fights. The best time to agree on what happens if a partner leaves, dies, or stops contributing is before any of that happens — when everyone is friendly.

4. Some states require it. California, Delaware, Maine, Missouri, and New York require LLCs to have an operating agreement (requirements vary on whether it must be written).

What to include: the complete checklist

The basics

  • Company name (exact legal name) and principal business address
  • Formation details: state, date filed, registered agent
  • Purpose statement: a general description of the business ("any lawful business activity" is standard)
  • Duration: usually "perpetual" unless you have an end date in mind

Ownership

  • Members and ownership percentages — who owns how much (must total 100%)
  • Capital contributions — what each member put in (cash, property, services) and what happens if more capital is needed
  • How new members are admitted — typically requires unanimous or majority consent

Money

  • Profit and loss allocation — usually proportional to ownership, but does not have to be
  • Distributions — when and how profits are paid out; who decides; whether distributions require a vote
  • Salaries or guaranteed payments — if members will be paid for their work in the business

Management and voting

  • Management structure: member-managed (all owners run it) vs. manager-managed (designated managers run it)
  • Voting rights and thresholds — what requires a majority vs. unanimous vote (big decisions like selling the company, taking on debt, or admitting members usually need a supermajority)
  • Member duties and time commitments — who does what

Changes and exits

  • Transfer restrictions — can a member sell their interest? To whom? Do other members get right of first refusal?
  • Buyout provisions — how a departing member's share is valued (this is the clause people fight over most)
  • What happens on death or disability of a member
  • Dissolution — how the LLC can be wound down and assets distributed

Boilerplate (do not skip)

  • Amendment procedures — how the agreement itself gets changed
  • Dispute resolution — mediation/arbitration clause can save fortune in legal fees
  • Governing law — which state's law applies
  • Signatures and dates for every member

Single-member LLC: the short version

If it is just you, your agreement can be much shorter — but still cover:

  1. You own 100%
  2. The LLC is member-managed by you
  3. How the LLC will be dissolved
  4. A statement that the LLC is separate from your personal affairs

One page is genuinely enough for many solo founders. The point is having something signed and dated.

Template vs. lawyer: when each makes sense

A quality template is fine when: you are a single-member LLC, or a multi-member LLC with simple 50/50 or proportional splits and no unusual arrangements. Reputable formation services include templates free.

Hire a business attorney ($300–$800) when: you have unequal contributions (one partner brings cash, another brings sweat equity), vesting schedules, outside investors, complex profit splits, or operations in multiple states. This is money well spent — fixing a bad agreement later costs far more.

Common mistakes

  • Downloading a random template and never customizing it. Fill in every bracket; delete what does not apply.
  • Never signing it. An unsigned agreement sitting in your downloads folder helps no one. Print, sign, date, store.
  • Forgetting to update it. Added a partner? Changed profit splits? Amend the agreement the same week.
  • Contradicting your Articles of Organization. The two documents should agree on basics like management structure.

Where to keep it

Signed copy with your formation documents (physical or digital), plus a backup in cloud storage. You do not file it with the state — it is an internal document. Banks, courts, and future partners are the audience.

The bottom line

An operating agreement takes 30–60 minutes with a good template and protects you for the life of your business. It is the highest-ROI document in your formation paperwork. Write it the same week you file — future you will be grateful.