Oregon LLC Operating Agreement: Drafting Checklist

If you’re starting a limited liability company (LLC) in Oregon, you’ll have to go through a few tiers of paperwork before opening the doors of your business. Of all the documents, the LLC operating agreement is the one that might be the most beneficial for your business as a whole.

Think of it as a road map for running your LLC — it outlines all the details surrounding how you operate the business, from rules and regulations to shares and voting rights. The sooner you have an operating agreement ready, the better.

Key Takeaways

• An LLC operating agreement is a legal document that outlines the operations and ownership structure of an Oregon limited liability company or that of another state.

• Business owners who create an Oregon LLC operating agreement build a framework for resolving potential disputes among business owners.

• A filing service is an affordable but reliable way to draft an LLC operating agreement, letting users focus on growing their small business instead of paperwork.

What Is an LLC Operating Agreement?

An LLC operating agreement is a legal document outlining the structure and methodology of running an LLC. It covers how to split the ownership, the daily decision-making process, and which members are responsible for specific tasks. Whether forming a single-member (sole-proprietorship) or multiple-member LLC in Oregon, creating this agreement is necessary to get your business off the ground.

This roadmap document shows everyone who owns and is employed by the business precisely what they need to do to keep up with various demands and circumstances.

State Requirements

If you’re starting a business in Oregon, the law doesn’t require that you turn in an operating agreement along with your Articles of Organization to the Oregon Secretary of State.[1] It’s a good idea to create one regardless. 

Even if your agreement isn’t written down, Oregon will recognize and abide by it, but having it written out is better for everyone so they know where they stand and have something to reference.

A few noteworthy points regarding Oregon state laws and LLC operating agreements:

• Oregon has set out several laws that govern how LLCs should operate. While business owners are free to include additional elements in the operating agreement, these should be consistent with the state’s laws and your Articles of Organization.

• Oregon regulations permit a great deal of variety in the operating agreement’s content. Giving different categories or sub-groups of members varying privileges, authorities, and responsibilities, including the right to vote, is possible.

• Oregon law demands that all members explicitly consent to modify the operating agreement. Hence, it’s paramount to decide on these issues ahead of time and add them to the operating agreement. That way, all members know the requirements and can work together to ensure they can meet them.

LLC Operating Agreement Benefits

• Separates your personal assets from the business, thus protecting them in case of legal issues.

• Provides a baseline business plan, which builds the foundation for your LLC operations.

• Helps open a business bank account and keeps it compliant with state laws regarding income tax and business licenses.

• Includes provisions for resolving member disputes. Provisions prevent costly and time-consuming litigation and ensure conflict resolution in a manner that is in the best interest of the business.

• Boosts trustworthiness for investors, partners, and financial institutions. It shows that the company is well-organized and ready to handle various scenarios.

• Allows for flexibility in profit and loss allocation among members. This can be particularly beneficial for attracting investors or compensating members in a way that is not strictly tied to their percentage of ownership.

• Outlines management responsibilities, corporation division, and voting rights in the operating agreement can make the business more efficient and lets all members clearly understand their role in decision-making.

• Describes what happens if a member leaves the LLC or dies. This protects the continuity of the business and can prevent unforeseen complications in ownership and management.

Who Needs an Operating Agreement?

Any business entity in Oregon that is operating as an LLC, whether single-member or multi-member, should have an operating agreement. Even if your business is small, new, or acts as an S-corp or sole proprietorship, it’s worth the effort.

This agreement can prevent unwelcome surprises in the future or legal disputes when members or outsiders disagree.

Drafting Your Oregon LLC Operating Agreement

Putting together an Oregon LLC operating agreement is a serious undertaking. You can go at it alone and write one from scratch or take the easier route and use a template[2] as a starting point.

The agreement must include all the necessary information to run your Oregon business effectively. Consider getting help from a lawyer or qualified professional to avoid unfortunate novice mistakes.

Step 1: Provide Business Information

Your LLC should have its official information on file, including its business name, street address, the type of business it conducts, and who is responsible for representing it. Check that your LLC name, office address, and Employer Identification Number (EIN) are all accurate and current. Make sure everything matches what’s in the Articles of Organization.

Step 2: List LLC Members

Every business owner and member must fully know their role in the company and what’s expected from them. List each owner and their contributions, stakes, and voting rights. With a multi-member LLC, determine the ownership percentages to assess how much risk each individual takes. For a single-member LLC, those responsibilities fall to one owner. Officially writing these provisions out helps them fully understand their responsibilities and how much control they have over their membership interest.

Step 3: Decide Member-managed vs Manager-managed

In a member-managed LLC, the members themselves will be involved in running the business and have an equal say in decisions. Alternatively, in a manager-managed LLC, one person (or a team) will be responsible for day-to-day operations as a manager, and members can focus on the big picture. No matter which format you choose, make sure to document it carefully. Set out who is responsible for what and what voting rights they have.

Step 4: Lay Out Administrative Operations

Now it’s time to plan out the technical details. How will all of the different administrative tasks be managed? Your documentation should provide clear direction on tax classifications for the IRS, profits, losses, allocation, and annual reports. It should also include information on member meetings and voting. Additionally, you’ll need to get specific about capital contributions, bank accounts, and how to handle daily business activities. The more detailed information you provide now, the fewer issues you’ll face in the future.

Step 5: Add and Remove LLC Members

At this stage, you’ll need to consider how to manage the addition and removal of members from the LLC. For example, new members may need to make specific contributions or agree to buyout rules beforehand. If someone decides to remove themselves from the LLC or step down, the remaining members’ ownership percentages and voting rights must be adjusted accordingly.

Create Your Operating Agreement Through a Filing Service

Now that you understand the intricacies of drafting an LLC operating agreement, consider allowing a professional filing service to take this burden off your shoulders for a reasonable filing fee.

Swyft Filings’ LLC operating agreement service is among the most affordable and can help you structure your business document quickly and easily.

If you have already formed your LLC, you can still use our services to build an Oregon LLC operating agreement that complies with the law and truly suits your company.

Form your business with Swyft Filings and include our LLC operating agreement add-on in your cart. You’ll have all the necessary documents to run your business efficiently from the beginning.

Start your business off on the right foot. 

FAQs

Is an LLC Operating Agreement required in Oregon?

In Oregon, having an LLC operating agreement is not a strict legal requirement. However, creating one is an incredibly wise decision, as it will protect your business’s interests and lay out in detail how your LLC should work internally.

How does an LLC Operating Agreement help protect my assets?

If you run an LLC, all your personal assets should be completely separate from your business assets. Creating an operating agreement is one way to protect yourself from potential debt and legal disputes. This document serves as a legally binding contract between members of the LLC and establishes ownership rights, financial duties, and other operational procedures that help maintain the LLC structure. This agreement ensures that disputes will be handled fairly while providing added protection for your assets against liabilities.

Who needs access to this document once it’s drafted?

Once the operating agreement is drafted, every member of the LLC should have access to it. Consider giving a copy to your lawyer as well in case you need legal advice. Keep it in a secure spot alongside other essential business materials. That way, everyone involved can easily review or reference it for any reason.

How do I edit information on this document if membership changes?

If you need to change the operating agreement, it’s best to confer with your group of members. Schedule a meeting where you can discuss any issues and come to a consensus on what should be edited. Once everyone agrees, update the document, have everyone sign off on the changes, and distribute a copy of the new version to all members.

What other legal documents do I need to draft for my Oregon LLC?

Forming an LLC in Oregon requires more than just an operating agreement. You’ll need to have a few other documents in order, too. That includes Articles of Organization, an EIN, and any business licenses or permits that the state might demand from your particular type of company. Once you have sorted everything out and filed with the necessary government authorities, you’re officially ready to open for business.

Bibliography

1. OregonLaws. “Oregon Revised Statutes (ORS) 63.431 - Operating Agreement.” Accessed June 26, 2023.

2. Oregon Secretary of State. “Business - Oregon Limited Liability Companies.” Accessed June 26, 2023.