An LLC operating agreement is the foundational governance document for a limited liability company. It defines the ownership structure, member rights and obligations, management authority, profit and loss allocation, distribution policy, decision-making rules, and what happens when a member wants to leave or the company is dissolved. Without an operating agreement, your LLC is governed by your state's default LLC statutes — which may not reflect what you and your co-founders actually agreed to. FreeContract generates a complete LLC operating agreement template from your description, for single-member and multi-member LLCs, in any state. Download as an editable Word document in seconds.

About LLC Operating Agreements

An LLC operating agreement is the internal governance document that controls how a limited liability company is managed, how profits and losses are allocated, and what happens when members join, leave, or the company is wound down. Most states do not require LLCs to have a written operating agreement — but the absence of one is one of the most common and costly mistakes small business owners make.

Without an operating agreement, state default LLC rules apply. These defaults are designed for a generic company, not yours. They may require unanimous consent for routine decisions, fail to protect a departing member's buyout rights, or leave ambiguous who has authority to sign contracts and open bank accounts. Worse, a court or tax authority may look at an LLC with no operating agreement as evidence that the members are treating the company as an extension of themselves — which can undermine the limited liability protection that motivated forming an LLC in the first place.

A comprehensive operating agreement covers: (1) Company basics — legal name, state, principal office, registered agent, and purpose. (2) Members and capital contributions — each member's name, ownership percentage, and what they contributed (cash, property, services). (3) Management structure — member-managed (all members participate in management) versus manager-managed (one or more designated managers, who may or may not be members). (4) Voting rights — what decisions require unanimous consent, what requires majority, and what the managing member can do unilaterally. (5) Profit and loss allocation — typically per ownership percentage, but the agreement can specify a different allocation. (6) Distributions — when and how the LLC distributes cash to members, and in what order. (7) Transfer restrictions — whether members can sell or transfer their interest freely, or whether existing members have a right of first refusal. (8) Admission of new members — what vote is required and whether new members receive management rights. (9) Dissociation and buyout — what happens when a member dies, becomes incapacitated, goes bankrupt, or simply wants to leave; how their interest is valued and bought out. (10) Dissolution — the events that trigger dissolution and the wind-down process.

For single-member LLCs, an operating agreement is still valuable: it documents the separation between personal and business assets, establishes the owner's authority to act for the company, and is often required by banks when opening a business account. For multi-member LLCs, it is indispensable — it is the document you will rely on when disagreements arise, and they always do eventually.

For multi-member LLCs with significant assets or investor members, have a business attorney review the agreement before it's signed.