LLC Operating Agreement

An Operating Agreement is mandatory in California, Delaware, New York, Missouri, and Maine. Most states don't require the members of an LLC to sign an Operating Agreement, and in cases when it is a single-member LLC, it's not especially necessary. However, multi-member LLCs greatly benefit from removing ambiguity via an Operating Agreement.

The terms of an Operating Agreement can be changed at any point. You'll need to draft an Operating Agreement Amendment Form that details all the changes to the agreement. Every member has to sign the amendment form for it to be valid.

The members of an LLC can choose to be taxed under the same rules that apply to partnerships, but there are other options. While members of a partnership are liable for the debts and obligations of the partnership, the members of an LLC are only liable to the business up to their individual capital investment.

Yes. The Operating Agreement should establish under what conditions new members are admitted into the LLC. Typically, an Operating Agreement requires an affirmative vote from all members to issue interest in the LLC to a new member.

No. Most contracts are valid if signed without the presence of a witness. You may choose to have the Operating Agreement notarized to avoid specific bureaucratic obstacles, but it's not a requirement.

As a legally-binding document, the Operating Agreement should include enforceable sanctions for members who break the agreement. However, mediation and arbitration are generally preferable to civil actions if the goal is to preserve the LLC.