How to Write an LLC Operating Agreement (With a Single-Member Template)

An operating agreement is the rulebook for your LLC. It says who owns what, who makes decisions, how money comes out and what happens when someone leaves, dies or wants to sell. Many owners skip it because their state does not require one. That can be a costly shortcut: without an agreement, state default rules decide for you, and they may not match what you intended. This guide explains how to write an LLC operating agreement and what to include.

Warning: This is general information, not legal advice. LLC laws differ by state. Have an attorney review agreements for multi-member LLCs or complex arrangements.

Why every LLC should have one

Even a single-member LLC benefits:

• It supports your liability shield. It shows the LLC is a separate entity with its own rules, which helps if someone challenges whether the LLC is truly separate from you.
• Banks often ask for it when you open a business account.
• It overrides state default rules, which might not fit how you run the business.
• It plans for the unexpected. It can say who manages the LLC or receives your interest if you die or become incapacitated, which matters to your family.

For multi-member LLCs, it is the document that prevents and resolves disputes.

What to include

Member-managed vs manager-managed

• Member-managed: all members run the business and can act for the LLC. Common for single-member and small partnerships where everyone works in the business.
• Manager-managed: one or more managers run the business; other members are passive owners. Common when some owners are investors who do not work in the company.

Make sure your agreement matches what you selected on your articles of organization, if your state asks.

Single-member operating agreement outline

Use this outline as a starting point and adapt it to your state and situation.

``` OPERATING AGREEMENT OF [LLC NAME] A [State] Limited Liability Company

1. Formation. [LLC Name] was formed on [date] by filing Articles of Organization with the [State] Secretary of State.
2. Member. [Your full name], residing at [address], is the sole member and owns 100% of the membership interest.
3. Purpose. Any lawful business.
4. Management. The LLC is member-managed. The Member has full authority to act for the LLC, including opening bank accounts, signing contracts, and hiring.
5. Capital. The Member contributed $[amount] / [property] on [date]. Additional contributions are at the Member's discretion.
6. Distributions. Distributions are made at the Member's discretion, subject to the LLC's ability to pay its debts.
7. Taxation. The LLC is a disregarded entity for federal tax purposes unless the Member elects otherwise.
8. Separateness. The LLC will keep its own bank accounts, books, and records, and will not commingle funds with the Member's.
9. Succession. On the Member's death or incapacity, [name] is designated to [manage the LLC / receive the membership interest], subject to applicable law.
10. Liability and indemnification. The Member is not personally liable for LLC debts solely by reason of being a member. The LLC will indemnify the Member for acts in good faith on its behalf.
11. Dissolution. The LLC dissolves on the Member's written decision or as required by law.

Signed: ____________________ Date: ________ [Your name], Member ```

Tip: The succession clause is the one most single-member owners forget. Without it, your family may struggle to access business accounts or keep the business running.

Multi-member issues to settle before you sign

1. Unequal effort or money. If one partner contributes cash and another contributes work, put the deal in writing, including vesting for the working partner's share.
2. Deadlock. With a 50/50 split, decide how ties are broken: mediation, a neutral adviser or a buy-sell mechanism.
3. Salaries vs distributions. Who gets paid for working, how much, and whether that comes before or after profits are split.
4. Non-compete and confidentiality. Enforceability varies by state.
5. Exit. How a departing member's interest is valued: a formula, an appraisal or a fixed price updated yearly.

A worked example: two partners, unequal contributions

Jamie contributes $40,000 in cash. Priya contributes no cash but will work full-time running operations. They agree to a 50/50 split.

Without a written agreement, questions pile up:

• If Priya leaves after six months, does she keep 50%?
• Does Jamie get his $40,000 back before profits are split?
• Is Priya paid a salary before distributions?

Their agreement settles it:

If Priya leaves after 18 months, she keeps the vested portion of her interest, about 25% of her 50%, or 12.5% of the company under a simple annual vesting schedule. The rest can be bought back under the agreement. Clear terms protect both partners and their friendship.

Signing and storing the agreement

• Have every member sign and date it.
• Keep the signed original with your formation documents, EIN letter and minutes or written consents.
• Update it when ownership, management or major terms change, using a written amendment signed by all members.
• Provide copies to your bank or lender if requested.

Operating agreement checklist

• ☐ Correct LLC name, state and formation date
• ☐ Members, contributions and ownership percentages
• ☐ Management structure matches state filings
• ☐ Distribution rules
• ☐ Voting thresholds for major decisions
• ☐ Transfer restrictions and buy-sell terms
• ☐ Succession plan for death or incapacity
• ☐ Tax classification noted
• ☐ Signed by all members and stored with records
• ☐ Attorney review for multi-member LLCs

Mistakes to avoid

• Skipping the agreement because the state does not require it
• Using a multi-member template for a single owner, or the reverse
• Leaving vesting and exit terms unwritten between partners
• Forgetting to update the agreement after ownership changes
• Mixing personal and business money, which undermines the agreement's separateness clause

Your next step

The operating agreement is one of several documents that keep your LLC protected. Forming a US LLC & Getting an EIN by Omer Muneer Qazi covers choosing a structure and state, filing, registered agents, operating agreements, getting an EIN, tax classification, bank accounts, licenses and staying in good standing, with templates for written consents and capital contribution records.