An LLC Operating Agreement is the fundamental governing document establishing member ownership percentages, voting rights, profit distributions, management structures, and buyout procedures.
Why Single-Member and Multi-Member LLCs Need One
Even for single-member LLCs, having a formal written Operating Agreement proves the legitimate corporate existence of the entity to courts, preventing creditors from "piercing the corporate veil" and reaching personal assets.
Core Structural Provisions to Include
- Ownership Units & Capital Contributions: Details initial member cash/asset investments and rules for future capital calls.
- Voting Thresholds & Management Structure: Specifies whether the LLC is member-managed or manager-managed, and defines majority vs. unanimous consent requirements.
- Buy-Sell (Right of First Refusal) Provisions: Restricts members from selling their shares to third parties without offering existing members first purchase rights.
- Dissolution & Winding-Up Rules: Establishes clear procedures for liquidating assets and settling liabilities if partners part ways.