What is an LLC operating agreement?

Similar to a partnership agreement or shareholder agreement, the LLC operating agreement defines the rights and duties of the LLC members and outlines how the LLC will be owned and operated. It is an essential document that all LLCs need to create and keep updated. It normally includes the following information:

  • Initial capital contributions of the members
  • Additional capital contribution requirements
  • Liability of the members
  • Rules on admission of new members
  • Division of profits and losses
  • A list of matters that require consent of the members
  • Meeting formalities
  • Transfer and termination of membership interests
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