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When an LLC has two or more owners, the operating agreement does real work. It decides who can sign contracts, how much each owner gets and how someone gets out. Download the Word file or the plain text version. The text is original, generic and free to use. It is not legal or tax advice.
What is in the multi-member template?
It has fifteen numbered sections and a Schedule A:
- The company and its formation details.
- Purpose.
- Registered agent and office.
- Capital and ownership, with a rule for approved capital calls.
- Management: by all members or by named managers.
- Votes, with a list of decisions that need a higher threshold.
- Profits, losses and distributions.
- Tax treatment and the person who deals with the tax authorities.
- Books, bank accounts and information rights.
- Limited liability and cover for costs.
- Transfers, first offer to the other members, and admitting new members.
- Leaving, death and disability.
- Deadlock.
- Ending the company.
- General terms.
Schedule A lists each member, contribution and percentage.
Which clauses cause the most arguments?
Owners usually fall out over a few things. Settle them first:
- Votes. Decide which actions need a simple majority and which need everyone: selling the business, borrowing over a set amount, adding an owner.
- Exit price. A buy-out clause that says how the price is set avoids a fight over value later. The template leaves the method for you to choose.
- Time and money. Say what happens if an owner puts in less than agreed or stops working in the business.
- Deadlock. Two 50 percent owners need a way out. The template offers mediation, then a buy-sell offer or closing the company.
How do you fill in the blanks?
Copy the legal name, state and formation date from the approved state filing. Then name the registered agent. Your state guide lists the rules, for example Ohio, Georgia or Colorado.
Pick the tax treatment with an accountant. The IRS says an LLC with at least two members is classified as a partnership by default, unless it files Form 8832 and elects to be treated as a corporation. See the IRS LLC page. An S corporation election is covered in our Form 2553 guide.
When should you sign it?
Sign right after the state approves the LLC, before money moves. An agreement signed after a dispute starts is much harder to agree on. Then:
- Apply for the EIN. See how to get an EIN.
- Open the bank account, with the signed agreement in hand.
- Store the signed copies with the formation papers.
Back to the main page: LLC operating agreement. One owner only? Use the single-member template.