How to Create an Operating Agreement for an LLC

When it comes to drafting an operating agreement for a limited liability company (LLC), there are three main approaches to creating the agreement. Which approach you choose will depend on how much money you want to spend, how much time you want to spend, and how complicated the ownership structure of your LLC is. The three approaches are described below in order of most expensive to least expensive. Keep reading for reasons why the owners of an LLC might choose each approach, and what is involved with each method for creating an LLC operating agreement.

Hiring a Full-Service Attorney to Create an LLC Operating Agreement

Hiring an attorney is always the safest and easiest route to take when dealing with any type of agreement. LLC operating agreements are no exception. This option is even more attractive if you think your LLC will need ongoing legal advice, and you want a dedicated attorney who will continuously respond to your calls or emails. However, this option is likely to be the most expensive. It also takes time to find an attorney who is the right fit for your business.

Another reason to use this option is if you have a multi-member LLC with a complicated ownership structure. For example, an LLC with three or more owners who have different percentages of ownership will likely want a traditional attorney to draft their LLC operating agreement. Another example is a business where one LLC member will be managing the LLC while the others are passive or silent owners. The LLC operating agreement will likely be more complicated in those scenarios. The more complicated your LLC operating agreement will be, the more you can justify the expense of hiring a traditional attorney.

Hiring an Online Service to Create an LLC Operating Agreement

A cheaper option than hiring a full-service attorney is to use an online attorney service, such as LegalZoom or Rocket Lawyer. These services may offer subscription services to provide legal advice for an ongoing monthly fee, including drafting operating agreements. Otherwise, they can perform individual tasks for a one-time fee. Drafting LLC operating agreements is one of the most common tasks that these services provide.

You will have the option to customize your agreement, although it will get more expensive if you plan to have a complicated operating agreement. For multi-member LLCs with lots of owners taking on various roles in the business, a traditional attorney is likely the better option.

The cost of online attorney services will generally be lower than dealing with an attorney in person. They are also more convenient because the process is completely online, without having to make a phone call or go to an office. However, you should shop around both online and with local attorneys to determine which service is the right fit for you.

Creating Your Own LLC Operating Agreement with a Template

The cheapest option to create an LLC operating agreement is to do it yourself. This may sound difficult, but there are many online resources available to make this process easier. For example, many services offer pre-made templates that will work fine for basic LLC operating agreements. Single-member LLCs are good candidates for this option. LLC operating agreement templates are also good for simple two-member LLCs.

One site that offers free and low-cost templates for LLC operating agreements is LawDepot. These sites also offer templates for other LLC documents, like Articles of Organization. Just like online legal service providers, these sites offer one-time or subscription services, and often offer free trials which allow you to get some documents for free.

What Should You Include in an LLC Operating Agreement?

An LLC operating agreement can be as simple or as complicated as the LLC members desire. Some common items that are addressed in an LLC operating agreement are:

· Name of the LLC

· Members of the LLC

· Location of the LLC

· Ownership percentages

· Process to admit new members

· Process to withdraw from the LLC

· Responsibilities and duties of the members

· Voting process for major LLC decisions

· Bookkeeping and accounting processes

Once You Have Created an LLC Agreement, Do You Need to File it with the State?

States do not require LLCs to file their operating agreements with the state. Unlike Articles of Organization, LLC operating agreements are to be held by the members. However, if the LLC ever seeks a bank loan or even a checking account, the bank might want to see the LLC operating agreement. That is one reason why it is a good idea to have an LLC operating agreement even if the members do not think they need one.