What is an LLC operating agreement?

The LLC operating agreement is a document created when setting up an LLC which governs how the LLC is going to be maintained and operated (the LLC operating agreement is similar to a partnership agreement or corporate bylaws). As a result, the LLC operating agreement is considerably more detailed than the articles of organization. The LLC operating agreement should address whether the LLC is going to be member-managed or manager-managed, and should outline what powers the members and/or managers will have. It should also address how the LLC handles meetings - how, when and where meetings are held, what notice is necessary before holding a meeting, what qualifies as a quorum, how voting and elections are handled, etc. The LLC operating agreement typically covers some other related issues, as well, such as who has the power and right to audit the company books and records, how the fiscal year is defined and how the agreement itself can be updated and amended. You can obtain boilerplate forms and samples of LLC operating agreements from many places, including in organization kits.

Once you have prepared your LLC operating agreement, you do not need to file them, like you do with articles of organization. Instead, they should simply be maintained in your company records. However, you may need to formally adopt the agreement - you should check the laws for the state you are organizing in. In some states, the incorporator has the power to adopt the agreement, other states require the first board of directors to formally adopt the agreement, and the remaining states leave both options open.