Operating Agreement Template — Define the Rules of Your Business
An Operating Agreement is the foundational legal document for your LLC. It outlines how your business will be run, how profits and responsibilities are divided, and what happens if a member leaves the company.
Even if it’s not legally required in your state, an Operating Agreement protects you from misunderstandings, legal disputes, and default state rules you might not agree with. With LegalSimpli, you can create a clear, lawyer-drafted Operating Agreement designed for your needs — no legal background required.
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Table of Contents
What Is an Operating Agreement?
An Operating Agreement is a legal document used by Limited Liability Companies (LLCs) to outline the internal structure and operating procedures of the business. It acts as a contract between the LLC members and governs key decisions — including how profits are shared, who has decision-making power, what happens if a member wants to leave, and how the company can be dissolved.
In a single-member LLC, the Operating Agreement still matters — it separates your personal identity from your business entity and helps protect your personal assets by proving that you are treating the business as a separate legal structure.
This document is especially important for multi-member LLCs, where misunderstandings can easily arise without clear rules. It establishes expectations early, avoids internal conflict, and provides a framework for navigating future events like adding new members, distributing profits, or selling the business.
When Do You Need an Operating Agreement?
The best time to create an Operating Agreement is when you're forming your LLC. In many states, it’s not legally required — but that doesn’t mean you can skip it. Without one, your business will be subject to your state’s default rules, which often don’t reflect how you want to run things.
Think of it like the user manual for your business. It spells out how decisions are made, how members are added or removed, and what happens if someone wants to leave or sell their share. Even if everything seems amicable now, clear documentation protects everyone in the long run.
What Happens If You Don’t Use One?
If you don’t have an Operating Agreement, your LLC is governed by your state’s “default” rules — a generic set of guidelines written into state law. These rules aren’t tailored to your business and can lead to confusion, frustration, and unintended consequences.
All members may have equal voting power, even if they invested different amounts
Profits may be split equally, regardless of contribution or effort
There may be no clear process for resolving disputes or removing members
Courts may “pierce the corporate veil” and hold you personally liable if your business appears unstructured
How to Complete an Operating Agreement
LegalSimpli makes it easy to create a professional Operating Agreement without hiring an attorney. Our platform walks you through the process in plain English, with helpful examples and state-specific guidance.
Here’s what to expect:
- Step 1: Provide Basic Company Information
You'll enter your LLC’s name, formation date, and state. You’ll also identify the members and their roles.
- Step 2: Define Ownership and Contributions
List each member’s ownership percentage and initial capital contributions — whether it's money, property, or services.
- Step 3: Establish Voting Rights and Management Structure
Choose whether your LLC will be managed by its members or by appointed managers. Define how decisions are made and what counts as a major vote.
- Step 4: Set Profit Distributions and Tax Treatment
Explain how profits and losses will be allocated, and choose how your LLC will be taxed — as a sole proprietorship, partnership, or corporation.
- Step 5: Plan for Changes and Exits
Add clauses for how members can leave, transfer their interest, or how the business can be dissolved if needed.
- Step 6: Review, Sign, and Store Safely
Once completed, download your Operating Agreement as a PDF or Word document. All members should sign it and keep a copy on file. Notarization is optional but can add an extra layer of authenticity.
Common Questions and Misunderstandings
- Is an Operating Agreement legally required?
Some states — like California, New York, and Missouri — do require LLCs to create an Operating Agreement. Even in states where it’s optional, having one is highly recommended for legal protection and business clarity.
- Can I make one if I already started my LLC?
Yes. You can create and sign an Operating Agreement at any time. In fact, it’s smart to create or update one after any major changes — like bringing on a new partner or changing the ownership split.
- What if I’m the only owner of my LLC?
You still need an Operating Agreement. It helps prove that you and the business are separate entities, which is crucial for protecting your personal assets in legal or financial matters.
- Is this different from Articles of Organization?
Yes. Articles of Organization are the form you file with the state to create your LLC. The Operating Agreement is an internal document that outlines how your LLC operates — it’s not submitted to the state but is equally important.
- Can I just write one myself?
Technically, yes — but it’s easy to miss important legal clauses or use vague language that causes problems later. Our templates are written by attorneys and designed to meet state standards, so you can be confident your agreement is thorough and enforceable.
- What’s the biggest mistake people make with Operating Agreements?
The most common error is downloading a generic template, changing a few words, and never actually signing it. An unsigned agreement may not be enforceable. The second biggest mistake is failing to update the agreement as your business grows. Regular review is key.
Related Documents and Services
Starting and running a business often requires more than one document. Depending on your plans, you might also need:
- Articles of Organization
The document you file with the state to officially create your LLC
- LLC Resolution Templates
For recording formal decisions made by members
- Business Contracts
Such as NDAs, service agreements, or contractor agreements
- EIN Registration Support
Instructions for getting a federal Employer Identification Number
LegalSimpli helps you put together a comprehensive legal foundation for your business — whether you're just starting or updating your paperwork as you grow.
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