Filing articles of organization is the easy part. It creates the entity. What it does not do is say who decides anything, how profits are split, what happens if an owner leaves, or how a deadlock is broken. That is the operating agreement's job, and it is routinely skipped.
Without one, the state decides
An LLC with no operating agreement is governed entirely by default statutory rules. Those defaults are generic and often the opposite of what the owners assumed. They may split profits by ownership percentage when the parties intended otherwise, or require unanimous consent for decisions the parties expected a majority to make.
The defaults are not written for your business. They are written for every business.
Single-member LLCs need one too
This surprises people. A single-member LLC's agreement is short, but it matters because it evidences that the LLC is a real, separate entity. Banks ask for it. So do potential buyers and lenders. And in a dispute over whether the entity is genuinely separate from you personally, its absence is unhelpful.
What the agreement should settle
- Ownership and capital, who owns what, who contributed what, and what happens if more money is needed
- Profit and loss allocation and how and when distributions are made
- Management, member-managed or manager-managed, and who can bind the company
- Voting, what needs a majority, what needs unanimity
- Transfer restrictions, whether an owner can sell to an outsider, and any right of first refusal
- Exit events, death, disability, withdrawal, divorce, bankruptcy
- Valuation, how a departing owner's interest is priced, agreed before anyone wants out
- Deadlock resolution, especially critical in a 50/50 company
- Dissolution, how the company winds up
The 50/50 problem
Equal partnerships feel fair at the start and are the hardest to unwind. With no tie-breaker, two owners who stop agreeing can paralyse a profitable business. A buy-sell mechanism, a neutral tie-breaker, or a mediation requirement costs very little to include and can save the company.
Write it while everyone is friendly
The only good time to agree what happens in a dispute is before there is one. Once positions have hardened, every clause becomes a negotiation and every negotiation costs money.
A tailored operating agreement is included in our $699 LLC formation, not a generic template, but terms that match how you actually intend to run the business.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. Rules differ by state and change over time. Please speak with a licensed attorney about your own situation.