What is an operating agreement and do I need one?

Question

Enformly · Accepted Answer

An operating agreement is an internal document that defines ownership, management, and decision rules for your LLC. Most states do not require you to file one, but you should have one regardless — banks, investors, and partners routinely ask for it.

The operating agreement governs how the LLC actually runs: member percentages, voting thresholds, profit allocation, admission of new members, buyouts, and dissolution. Without one, the state's default LLC statute fills the gaps, and those defaults are usually worse than a tailored agreement.

Only a few states legally require an operating agreement — New York, California, Missouri, Maine, and Delaware all have some form of requirement. But filing is not required; the document is kept internally.

Banks frequently request the operating agreement when opening a business account, especially for multi-member LLCs. Investors, lenders, and potential acquirers all expect to see it during diligence.

A single-member LLC should still have one. It reinforces the legal separation between owner and entity, which matters for maintaining limited-liability protection.