Limited Liability Company (LLC) FAQ

Does my LLC need an operating agreement?

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Answer:

Does my LLC need an operating agreement?

Although most states' LLC laws don't require a written operating agreement, you shouldn't consider starting business without one. Here's why an operating agreement is necessary:

  • It helps to ensure that courts will respect your personal liability protection by showing that you have been conscientious about organizing your LLC as a legitimate business.
  • It sets out rules that govern how profits will be split up, how major business decisions will be made, and the procedures for handling the departure and addition of members.
  • It helps to avert misunderstandings among the owners over finances and management.
  • It allows you to create your own operating rules rather than being governed by the default rules in your state's LLC laws, which might not be to your benefit.

For more information, see Nolo's article The LLC Operating Agreement.

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