What is an Operating Agreement?
The operating agreement is the document that sets forth how your LLC will run. This document outlines several important elements of your LLC including:
- Basic details of the LLC including the name, purpose, and address
- The roles and responsibilities of members and managers
- Ownership percentage and initial contribution of members
- Profit and loss management plans
- Outline of how taxes are handled for the LLC
- Liability clause, limiting the liability of individual members
The operating agreement is an internal document with the LLC. Most states do not require a copy of the operating agreement to be filed with the secretary of state. Delaware requires LLC's to have an operating agreement but does not require a filed copy of it.
How do I get an Operating Agreement?
If you form your LLC with The Incorporators, we provide you with an operating agreement for your LLC which can be edited and utilized as you see fit.
You'll find plenty of examples of operating agreements online or you are welcome to work with an attorney or draft one yourself. Be cautious when using a free template and ensure that it is customized to fit the needs of your company.
When it's Time to Change Your Operating Agreement
Your LLC Operating Agreement should be kept up-to-date at all times.
LLC Operating Agreements are often changed for the following reasons:
- You change the name of your LLC
- You need to add or remove a member
- You need to change your manager(s)
- Investment or capital amount updates
- You change the nature of the activity your LLC conducts
- Other managerial or financial changes
If any of these changes take place, you'll need to update your operating agreement.
How to Change Your LLC Operating Agreement
Some states require changes in membership be submitted to the state via an amendment to your formation document (with some inevitable fees paid). Delaware has no such requirement. Changes made to your membership may be made by the existing members with no notification to the Delaware Division of Corporations.
The Operating Agreement includes a Schedule A, which is a list of Members’ names and addresses, their capital contribution and percentage of interest in the company. This schedule would be updated to reflect any changes in membership.
Members are issued a membership certificate with the percentage of ownership listed (similar to a stock certificate). The company membership directory would then be updated. If you need membership certificates and a membership directory, you can purchase them from us here, whether or not you formed your company with us.
Other changes to the operating agreement can be done as amendments. An amendment is a simple document that clearly states the modifications to the original operating agreement and is signed by all members. This amendment becomes part of your operating agreement.
The details regarding how to approve amendments are set forth in your original operating agreement. Some companies require 100% approval by all members while others require a majority approval.
If you seek to change any of the information included on your original Articles of Formation document (such as the name of your LLC), you should file the amendment with the state of Delaware.
The Incorporators can assist you with filing an amendment. Please fill out this form and we'll get back to you promptly with details and pricing.