Use this operating agreement template to cover ownership, voting, profit sharing, and dissolution clauses so your LLC stays protected from day one.
By Omer Aydin ·
An LLC operating agreement should cover ownership percentages, member roles, voting rules, profit distribution, and procedures for adding or removing members. A solid template also addresses what happens if the business dissolves.
Most founders treat the operating agreement as a formality. It is not. This is the document that decides who controls the company when things get complicated, and things always get complicated eventually. Fill it in carefully before you need it.
This is not legal advice. Have your company's counsel review any agreement before you sign it.
Without an operating agreement, your LLC falls back on your state's default rules, which were written for generic businesses, not yours.
The document does something no state default can do: it records what you and your co-founders actually agreed to. Banks often ask for it when you open a business account. Investors ask for it during due diligence, and courts look at it when disputes arise.
Single-member LLCs need one too. A written agreement reinforces the separation between you and the company, which is the whole point of forming an LLC in the first place.
Every operating agreement template should include these six sections. If any one of them is missing, you have a gap that a dispute can fall through.
1. Ownership percentages — who owns what share of the company and how that was determined.
2. Member roles and responsibilities — what each member is expected to contribute and manage day to day.
3. Voting rights and decision-making rules — which decisions require a simple majority, a supermajority, or unanimous consent.
4. Profit and loss distribution — when profits are distributed, in what proportion, and how losses are allocated.
5. Procedures for adding or removing members — what happens when someone wants to join, leave, or is forced out.
6. Dissolution clause — how the company winds down if members decide to close it, including how assets are distributed.
Below is a copy-ready template. Replace every bracketed placeholder with your actual details. This is a starting structure, not a substitute for legal review.
OPERATING AGREEMENT OF [LLC NAME]
A [State of Formation] Limited Liability Company
1. Formation
[LLC Name] ("the Company") was formed on [Date of Formation] under the laws of the State of [State]. The Company's principal place of business is [Address].
2. Members and Ownership
The Company has the following members and ownership percentages: [Member 1 Full Name]: [X]%; [Member 2 Full Name]: [X]%. Each member's initial capital contribution is listed in Exhibit A.
3. Management
The Company is [member-managed / manager-managed]. If manager-managed, the appointed Manager is [Manager Name], who holds authority to bind the Company in ordinary business matters.
4. Voting
Decisions requiring a vote of the members shall be decided by [simple majority / supermajority of [X]% / unanimous consent]. Major decisions, including taking on debt above $[Amount], admitting new members, or amending this agreement, require [unanimous consent / a supermajority of [X]%].
5. Profit and Loss Distribution
Profits and losses shall be allocated in proportion to each member's ownership percentage unless otherwise agreed in writing. Distributions shall be made [quarterly / annually / at the discretion of the members] after the Company meets its operating obligations.
6. Transfer of Membership Interest
No member may transfer their interest without the written consent of [all other members / a majority of members]. The remaining members hold a right of first refusal at fair market value.
7. Dissolution
The Company may be dissolved by [unanimous consent / a vote of members holding at least [X]% of interests]. Upon dissolution, assets shall be applied first to outstanding debts, then distributed to members in proportion to their ownership percentages.
Keep a signed copy with your company records and update it whenever ownership or management changes.
The template above is only as good as the language you put into it. Four sections cause the most problems in practice.
Vague voting rules. Writing "decisions are made by the members" tells you nothing. Specify which decisions need what threshold. A weak version says "major decisions require agreement." A stronger version names the threshold: "any debt obligation exceeding a set dollar limit requires unanimous written consent."
Missing buyout terms. Many agreements describe how to leave but not at what price. Without a valuation method or a buyout formula, a departing member and the remaining ones will disagree on what the interest is worth. Name a method upfront: book value, a multiple of revenue, or a third-party appraisal.
Undefined distribution timing. "Profits will be distributed periodically" creates arguments. Set a schedule and a minimum cash reserve the company must hold before any distribution goes out.
Weak liability language. Sloppy indemnification clauses or missing exculpation provisions can blur the line between member and company. Your counsel can tighten this, but at minimum, make sure the agreement treats the LLC as a separate legal entity in every clause.
Your operating agreement should be reviewed and updated whenever ownership changes, a member exits, or the company takes on a significant new line of business. For a full picture of what ongoing compliance looks like after formation, the LLC annual compliance guide covers each requirement in detail.
If you are still in the formation stage, Lovie Formation handles the filing, EIN application, and registered agent setup, so you can focus on getting the operating agreement right before you sign anything.
Yes. Even if you are the only member, a written operating agreement reinforces the legal separation between you and your company. Without it, a court or creditor could argue the LLC is not truly distinct from you personally, which defeats the liability protection the structure is supposed to provide. Some banks also require it before opening a business account.
In most states, an operating agreement does not need to be notarized or filed with any government office. It is an internal document kept with your company records. That said, all members should sign it, and you should keep dated copies. Some states have specific execution requirements, so confirm the rules for your state of formation.
Yes. An operating agreement can be amended at any time, subject to whatever amendment procedure it specifies. Most agreements require either a majority vote or unanimous consent to make changes. Document every amendment in writing, have all relevant members sign it, and attach it to the original agreement so your records stay complete.
In a member-managed LLC, members are directly involved in running the business and making day-to-day decisions. In a manager-managed LLC, members step back from operations and delegate authority to one or more appointed managers. The manager-managed structure suits LLCs with passive investors who want ownership without operational responsibility. Your operating agreement must state which structure you are using.
An operating agreement is the document that turns a state filing into a functioning company with clear rules. The six sections above — ownership, roles, voting, distributions, transfers, and dissolution — cover the situations that cause the most disputes.
Start with the template in this article, fill in every placeholder, and have your counsel review the voting and buyout language before you sign. Getting those two sections right before the first disagreement is far easier than fixing them after.
