LLC Operating Agreement Template, Free Download 2026

By Jessica Henwick, Editor-in-ChiefLegally reviewed by David Chen, Esq.
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When Do You Need a LLC Operating Agreement?

You have just filed articles of organization to form a new limited liability company and need a written operating agreement to define ownership percentages, capital contributions, profit distributions, and management structure before the business begins operations.

A multi-member LLC needs a formal governance document to establish voting rights, decision-making procedures, dispute resolution mechanisms, and buy-sell provisions to prevent deadlocks and disagreements that could paralyze the business. Our Agreement preparation can draft customized multi-member governance provisions tailored to your ownership structure.

A single-member LLC owner needs an operating agreement to reinforce the legal separation between personal and business assets, which is essential for maintaining the liability protection that motivated forming the LLC in the first place.

New members are joining an existing LLC through capital investment or sweat equity, and the ownership structure needs to be documented clearly to define each member's rights, obligations, and share of profits and losses.

The LLC is entering into contracts, opening business bank accounts, or seeking financing, and banks, vendors, and lenders are requesting a copy of the operating agreement to verify the authority of the person signing on the company's behalf.

Members want to establish transfer restrictions, right-of-first-refusal provisions, and exit procedures to control who can become a member and prevent unwanted third parties from acquiring ownership interests in the company through a bill of sale form or assignment.

📋 Industry Standard: The SBA recommends that every LLC have a written operating agreement, even in states that do not legally require one. Banks, lenders, and commercial landlords routinely request a copy before opening accounts or executing leases.

⚠ Common Pitfall: The IRS treats multi-member LLCs as partnerships by default for tax purposes. You must file IRS Form 1065 annually, and each member receives a Schedule K-1 reporting their share of income, deductions, and credits. Profit allocation provisions that lack "substantial economic effect" under Treasury Regulation § 1.704-1(b) can be reallocated by the IRS, potentially triggering unexpected tax liability for individual members.

What Should a LLC Operating Agreement Include?

Company Formation and Purpose

Identify the LLC by its legal name exactly as registered with the state, its principal place of business, the state of formation, the effective date, and the registered agent for service of process. Whether you are drafting a single member LLC operating agreement or a multi-member LLC operating agreement, state the company's purpose broadly (e.g., "to engage in any lawful business activity") to provide maximum operational flexibility, or narrowly if the members prefer to restrict the LLC's scope of operations.

Member Contributions and Ownership Percentages

Document each member's initial capital contribution (cash, property, or services), their resulting ownership percentage, and any future contribution obligations. Clearly defining ownership percentages at the outset prevents disputes about profit sharing, voting power, and distribution rights. Include provisions for additional capital calls if the business needs future funding and the consequences of a member's failure to contribute.

Profit and Loss Allocation

Specify how profits and losses are allocated among members. The default is pro rata based on ownership percentages, but members can agree to disproportionate allocations for legitimate business reasons (subject to IRS substantial economic effect rules). Define when and how distributions are made, whether distributions are mandatory or at the manager's discretion, and minimum distribution requirements to cover members' tax obligations on pass-through income.

Management Structure

Designate whether the LLC is member-managed (all members participate in day-to-day decisions) or manager-managed (one or more designated managers run operations while other members are passive investors). Define the scope of management authority, actions requiring member approval, and voting thresholds for major decisions such as taking on debt, selling assets, admitting new members, or dissolving the company.

Transfer Restrictions and Buy-Sell Provisions

Establish rules governing the transfer of membership interests, including right-of-first-refusal provisions giving existing members the option to purchase a departing member's interest before it can be sold to an outsider. Include buy-sell triggers (death, disability, retirement, bankruptcy, or voluntary withdrawal), valuation methods (book value, appraised value, or formula-based), and payment terms for buyouts. These provisions prevent unwanted third parties from becoming members.

Dissolution and Winding Up

Define the events that trigger dissolution (unanimous vote, judicial decree, bankruptcy, or specific triggering events) and the procedures for winding up the company's affairs, including liquidating assets, paying creditors, and distributing remaining assets to members in proportion to their capital accounts. Without clear dissolution provisions, members may face expensive litigation to resolve disagreements about ending the business.

Dispute Resolution

Include a multi-step dispute resolution process, typically beginning with informal negotiation, escalating to mediation, and ultimately to binding arbitration or litigation. Specify the venue, governing law, and whether the prevailing party is entitled to attorneys' fees. Effective dispute resolution provisions can save the LLC hundreds of thousands of dollars in litigation costs. Some operating agreements also incorporate deadlock-breaking mechanisms such as shotgun buy-sell clauses.

Legal Details: Key Clauses in a LLC Operating Agreement

Formation and Name
1.1

The Members hereby form a limited liability company (the "Company") pursuant to the provisions of the Limited Liability Company Act of the State of _____________ (the "Act"). The name of the Company shall be _________________________, LLC, and all business of the Company shall be conducted under such name or such other names as the Members may designate from time to time in compliance with applicable law.

1.2

The Members shall cause to be filed all certificates and documents, and shall take all such other actions, as may be required or advisable under the Act and the laws of any jurisdiction in which the Company conducts business to establish, maintain, and protect the Company as a limited liability company.

Purpose and Powers
2.1

The purpose of the Company is to engage in any lawful business activity for which a limited liability company may be organized under the Act. The Company shall possess and may exercise all powers and privileges granted by the Act, by any other applicable law, or by this Agreement, together with any powers incidental thereto, so far as such powers are necessary or convenient to the conduct, promotion, or attainment of the purposes of the Company.

2.2

The Company shall have the power to own, hold, and dispose of real and personal property; to borrow money and issue evidences of indebtedness; to enter into contracts; to sue and be sued; and to do all things necessary, convenient, or incidental to its purposes as set forth herein.

Principal Office and Registered Agent
3.1

The principal office of the Company shall be located at such place as the Members may from time to time designate. The registered agent and registered office of the Company shall be as set forth in the Articles of Organization filed with the Secretary of State, and may be changed from time to time by the Manager or Members in accordance with the Act.

Members and Membership Interests
4.1

The names, addresses, and percentage interests of the Members are set forth in Exhibit A attached hereto and incorporated by reference. Each Member’s percentage interest represents such Member’s share of profits, losses, distributions, and voting rights unless otherwise specified in this Agreement.

4.2

No Member shall have any interest in the specific property of the Company. A Member’s interest in the Company constitutes personal property and shall be subject to the terms and conditions of this Agreement. No Member shall have priority over any other Member with respect to distributions, allocations, or return of capital, except as otherwise provided herein.

Capital Contributions
5.1

Each Member shall contribute to the capital of the Company the amount set forth opposite such Member’s name in Exhibit A. Capital contributions may be made in cash, property, services, promissory notes, or other obligations to contribute cash or property, as agreed by the Members. The fair market value of non-cash contributions shall be determined by mutual agreement of the Members.

5.2

No Member shall be required to make any additional capital contribution beyond the initial contribution without the unanimous written consent of all Members. No Member shall be entitled to interest on any capital contribution or to withdraw or demand the return of any capital contribution, except as expressly provided in this Agreement.

5.3

If additional capital is needed for the Company’s operations, the Members may, by majority vote, authorize the Company to borrow funds from third parties or from Members on commercially reasonable terms. Any loans made by a Member to the Company shall not be treated as capital contributions and shall bear interest at a rate determined by the Members.

Allocations and Distributions
6.1

The net profits and net losses of the Company for each fiscal year shall be allocated among the Members in proportion to their respective percentage interests, unless otherwise required by the Internal Revenue Code or applicable Treasury Regulations. Items of income, gain, loss, deduction, and credit shall be allocated consistently with the allocation of profits and losses.

6.2

Distributions of available cash shall be made at such times and in such amounts as the Members shall determine, in proportion to the Members’ respective percentage interests. Notwithstanding the foregoing, no distribution shall be made if such distribution would violate the Act or render the Company unable to pay its debts as they become due in the ordinary course of business.

6.3

The Company shall distribute to each Member, no less frequently than quarterly, an amount equal to such Member’s estimated federal and state income tax liability attributable to the Company’s income allocated to such Member ("Tax Distribution"), calculated at the highest marginal individual income tax rate applicable in the relevant jurisdictions.

Management and Voting
7.1

The Company shall be managed by its Members in proportion to their percentage interests, unless the Members designate one or more Managers as set forth in Exhibit B. Each Member or Manager shall have the authority to bind the Company in the ordinary course of business. Actions outside the ordinary course shall require the approval of Members holding a majority of the percentage interests.

7.2

The following actions shall require the unanimous written consent of all Members: (a) sale or disposition of all or substantially all Company assets; (b) merger or consolidation with another entity; (c) amendment of this Agreement; (d) admission of new Members; (e) filing for bankruptcy or assignment for the benefit of creditors; and (f) any transaction between the Company and a Member or affiliate thereof.

7.3

Any Manager or managing Member shall devote such time and attention to the business of the Company as is reasonably necessary and shall manage the Company’s business and affairs in good faith with the care an ordinarily prudent person in a like position would exercise under similar circumstances, consistent with the applicable standard of care under the Act.

Transfer of Membership Interests
8.1

No Member shall sell, assign, transfer, pledge, hypothecate, or otherwise dispose of all or any portion of such Member’s interest in the Company without the prior written consent of Members holding at least a majority of the remaining percentage interests. Any purported transfer in violation of this provision shall be null and void and of no force or effect.

8.2

In the event a Member desires to transfer all or any portion of such Member’s interest, the remaining Members shall have a right of first refusal to purchase the interest on the same terms and conditions offered by the prospective transferee. The remaining Members shall have thirty (30) days from receipt of written notice to exercise such right, and the purchase price shall be paid within sixty (60) days of exercise.

Dissolution and Winding Up
9.1

The Company shall be dissolved upon the occurrence of any of the following events: (a) the unanimous written consent of all Members; (b) the entry of a decree of judicial dissolution under the Act; (c) the occurrence of any event that makes it unlawful for the Company to continue its business; or (d) any other event specified in this Agreement as causing dissolution.

9.2

Upon dissolution, the Company’s affairs shall be wound up, and its assets shall be distributed in the following order of priority: (a) payment of debts and liabilities to creditors, including Members who are creditors; (b) establishment of reserves for contingent liabilities; (c) return of capital contributions to Members; and (d) distribution of the balance to Members in proportion to their percentage interests.

Indemnification
10.1

The Company shall indemnify, defend, and hold harmless each Member, Manager, officer, employee, and agent of the Company from and against any and all claims, demands, losses, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees) arising out of or in connection with the management or conduct of the Company’s business, except to the extent attributable to such person’s gross negligence, willful misconduct, or knowing violation of law.

10.2

No Member or Manager shall be personally liable for the debts, obligations, or liabilities of the Company solely by reason of being a Member or Manager. The liability of each Member shall be limited to the amount of such Member’s capital contribution and share of undistributed profits, as provided under the Act.

General Provisions
11.1

This Agreement constitutes the entire agreement among the Members with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether oral or written. This Agreement may be amended only by a written instrument signed by all Members.

11.2

This Agreement shall be governed by and construed in accordance with the laws of the State of _____________, without regard to its conflicts of law principles. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

11.3

All notices required or permitted under this Agreement shall be in writing and shall be deemed delivered when personally delivered, sent by certified mail (return receipt requested), or sent by nationally recognized overnight courier to the address of each Member as set forth in Exhibit A, or to such other address as a Member may designate in writing.

Signature Requirements

E-Signature Valid

LLC operating agreements are valid with electronic signatures in all 50 states.

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How to Fill Out a LLC Operating Agreement

1

Enter Company Information

Fill in the LLC's legal name as it appears on the articles of organization, the state of formation, the filing date, the principal business address, and the registered agent's name and address. This information must match the state filing exactly to avoid discrepancies that could cause problems with banks, lenders, or courts.

2

List All Members and Contributions

Enter each member's full legal name, address, initial capital contribution amount and type (cash, property description, or services valued at a specific amount), and resulting ownership percentage. The total of all ownership percentages must equal exactly one hundred percent. If any contributions are made over time rather than at formation, document the contribution schedule.

3

Define the Management Structure

Select member-managed or manager-managed governance. For manager-managed LLCs, identify the initial manager(s) by name, define their authority and compensation, and establish the process for appointing and removing managers. For member-managed LLCs, define voting thresholds (majority, supermajority, or unanimous) for different categories of decisions.

4

Set Distribution and Allocation Rules

Specify the profit and loss allocation method (usually pro rata by ownership percentage) and the distribution schedule (monthly, quarterly, annually, or at the manager's discretion). Address tax distributions that ensure members receive enough cash to cover their income tax obligations on pass-through profits, even if the company is retaining earnings for growth.

5

Complete Transfer and Exit Provisions

Fill in the transfer restriction details, including right-of-first-refusal terms, permitted transfers (to family trusts or other members), valuation methodology for buyouts, and payment terms (lump sum or installment payments over a defined period). Address what happens upon a member's death, disability, or bankruptcy by reference to the buy-sell provisions.

6

Execute the Agreement

All members must sign and date the operating agreement. While most states do not require notarization, having signatures notarized adds credibility when presenting the agreement to banks, lenders, and courts. Attach any exhibits referenced in the agreement, such as capital contribution schedules, property descriptions, or service valuation memoranda. Each member should retain an original signed copy.

Free Template vs Custom LLC Operating Agreement

FeatureFree TemplateCustom (AI or Attorney)
Single-member <strong>LLC</strong> <strong>operating agreement</strong> form in printable format
Multi-member with customizable ownership splitsMulti-member agreements require detailed governance provisions-
Manager-managed governance provisions-
Buy-sell and right-of-first-refusal clausesCritical for protecting member interests-
Basic profit distribution provisions
Tax distribution and allocation provisions-
Dispute resolution and deadlock provisions-
State-specific compliance language<strong>Operating agreement</strong> requirements vary by state-

Key Facts About LLC Operating Agreement Documents

Operating agreement governs LLC internal operations.

Members define profit distribution in operating agreement.

Operating agreement protects limited liability status.

Single-member LLC needs operating agreement for asset protection.

Operating agreement establishes management structure.

Key Legal Terms in a LLC Operating Agreement

LLClimited liability companyoperating agreementmembermanagermember-managedmanager-managedcapital contributionprofit distributiondissolutionarticles of organization

When a Free Template Is Not Enough

Free templates cover standard situations, but a professionally drafted llc operating agreement accounts for state-specific requirements, unusual circumstances, and enforceability considerations that generic forms miss. If your situation involves significant assets, complex terms, or potential disputes, request an attorney-drafted llc operating agreement with a custom quote based on your situation.

LLC Operating Agreement Template FAQ

What is an <strong>LLC</strong> <strong>operating agreement</strong> and is it required?
An LLC operating agreement is the foundational governance document that establishes the rules, structure, and procedures for operating a limited liability company. It defines member ownership percentages, capital contributions, profit and loss allocation, management authority, voting rights, transfer restrictions, dissolution procedures, and dispute resolution mechanisms. While only a handful of states legally require a written operating agreement (most notably New York, California, Missouri, Maine, and Delaware), having one is critically important regardless of your state's requirements. Without an operating agreement, your LLC is governed entirely by your state's default LLC statute, which may impose rules that do not align with your business intentions. For example, many states' default rules allocate profits equally among members regardless of ownership percentages, give all members equal management authority, and allow members to freely transfer their interests to outsiders. An operating agreement overrides these defaults with terms specifically tailored to your business. Additionally, banks, lenders, and sophisticated business partners will typically require a copy of your operating agreement before doing business with your LLC. Our LLC operating agreement drafting service ensures your agreement meets both legal requirements and banking standards for acceptance.
Do I need an <strong>operating agreement</strong> for a single-member <strong>LLC</strong>?
Yes, a single-member LLC should have an operating agreement even though there are no other members to establish rights between. The primary purpose of a single-member operating agreement is to reinforce the legal separation between you personally and your LLC, which is the entire reason for forming the entity. Courts can "pierce the corporate veil" and hold you personally liable for LLC debts if they determine that the LLC is merely your alter ego rather than a legitimate separate entity. Key factors courts examine include whether the LLC has its own operating agreement, whether the member maintains separate bank accounts, and whether the LLC observes basic formalities. A written operating agreement demonstrating that you treat the LLC as a separate legal entity is one of the strongest pieces of evidence in your favor if a creditor ever attempts to reach your personal assets. The agreement should document your capital contributions, establish that you are the sole member and manager, authorize you to act on the LLC's behalf, and set basic operational procedures.
Can the <strong>operating agreement</strong> be changed after formation?
Yes, an operating agreement can be amended at any time by following the amendment procedures specified in the agreement itself. Most well-drafted operating agreements include an amendment clause that defines the voting threshold required to modify the agreement, which is typically a majority or supermajority vote of the members by ownership percentage. Some provisions may require unanimous consent to change, such as modifications to ownership percentages, capital contribution obligations, or fundamental changes to the LLC's purpose. The amendment should be in writing, signed by all members who approved it, and attached to the original operating agreement as a formal addendum. Common reasons for amending an operating agreement include admitting new members, adjusting ownership percentages after additional capital contributions, changing the management structure from member-managed to manager-managed, updating distribution policies, revising transfer restrictions, or reflecting a change in the LLC's registered agent or principal place of business. Maintaining a clear record of all amendments is essential for documenting the LLC's governance history.
What happens if my <strong>LLC</strong> does not have an <strong>operating agreement</strong>?
If your LLC does not have a written operating agreement, the company is governed entirely by the default provisions of your state's LLC statute. These default rules often produce outcomes that members did not intend or expect. For example, many states' default rules allocate profits and losses equally among all members regardless of their capital contributions or ownership percentages, meaning a member who invested ninety percent of the capital receives the same share as a member who invested ten percent. Default rules typically give every member equal management authority and voting power, allow members to transfer their interests freely without consent from other members, and impose minimal requirements for dissolution. In a dispute between members, a court will apply the state's default rules to resolve the disagreement, which may produce a result that neither member wanted. The absence of an operating agreement also weakens the LLC's liability protection because courts view the lack of basic corporate formalities as evidence that the entity is not being treated as a genuine separate entity from its members.
What is the difference between member managed and manager managed LLC?
In a member-managed LLC, all members have the authority to participate in the day-to-day management and decision-making of the business. Each member can bind the LLC to contracts, manage bank accounts, hire employees, and make operational decisions. This structure works well for small LLCs where all members are actively involved in running the business. In a manager-managed LLC, one or more designated managers (who may or may not be members) handle daily operations, while the remaining members function as passive investors with limited management authority. Managers have the power to bind the LLC in ordinary business transactions, while major decisions (such as taking on significant debt, selling substantial assets, or admitting new members) typically require member approval. Manager-managed structures are common in LLCs with passive investors, real estate investment LLCs, and situations where professional management is preferred. The operating agreement should clearly define which decisions fall within the manager's authority and which require member consent.

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