While articles of organization create the LLC, an operating agreement is a separate legal document that explains how the LLC operates. Despite their importance, not all states require submission of written operating agreements to the state. However, because of how important they are in confirming how the LLC works, SBA requires written operating agreements from all Limited Liability entities.
The operating agreement is similar to a corporation's bylaws in that it sets forth the financial details regarding the company, including each member's initial financial contribution to the LLC, voting rights afforded to each member, and percentage of interest each member holds.
These agreements should typically include the rules for:
* Voting rights among members
* Issuing and transferring ownership interest among members
* How a new member will join, and if the members will allow a new member to join the LLC
* Profit/loss allocation to each member
* How the LLC will be dissolved
* What happens if a member dies, goes bankrupt, becomes incapacitated, or gets a divorce
* Financial provisions, including the specific accounting method that will be used and how the LLC will be taxed, i.e. corporation, sole proprietorship, or partnership (depending on how many members)
* The roles and responsibilities of each member