Free. No signup. Single or multi-member — capital contributions, distributions, management structure, and transfer restrictions for your LLC.
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What an LLC operating agreement is for
An LLC operating agreement is the governing document for a limited liability company. It defines member ownership, management authority, how capital is contributed and profits are distributed, what approval is needed for major decisions, and how members can sell or transfer their interest. Without one, your state's default LLC rules apply.
Single-member LLC owners who want to document their entity's structure for banks, investors, and contracts. Multi-member LLCs where the ownership and governance rules need to be written down before a dispute arises.
When you form the LLC or shortly after. Banks require it to open a business account. Investors want to review it before committing capital. Courts need it to confirm the liability shield is real. Do not wait.
Not appropriate for corporations — use bylaws and a shareholders' agreement. Not a substitute for forming the LLC itself — the operating agreement governs the LLC after formation, not instead of it.
What BizDraft asks you
Registered LLC name, state of formation, principal address.
Each member's name, ownership percentage (membership interest).
What each member contributes at formation — cash, property, services.
Member-managed or manager-managed. Manager name and authority scope if applicable.
Routine vs. major decisions. Voting thresholds. Supermajority requirements.
When and how profits are distributed. Tax distributions. Discretionary vs. mandatory.
Right of first refusal, consent requirements, permitted transfers to family or trusts.
Dissolution triggers and winding-up process, liquidation priority.
What the AI generates
Plain-English, state-specific, ready to execute. The sections that make your LLC real and governable.
Each member's percentage interest, initial capital contribution, and capital account maintenance methodology consistent with IRS partnership tax rules.
Member-managed vs. manager-managed election, manager authority and limitations, actions requiring member vote, and meeting requirements.
Routine decisions requiring majority vote, major decisions requiring supermajority (sale of the business, new members, debt above a threshold), and deadlock resolution.
Distribution timing and approval, tax distribution policy to cover pass-through tax obligations, and restrictions on distributions that would impair the LLC's ability to pay debts.
Right of first refusal on membership interest transfers, consent requirements, permitted transfers to revocable trusts and family entities, and anti-dilution provisions.
Member and manager indemnification for acts taken in good faith within their authority. Limitation of liability to the extent permitted by state law.
Common mistakes
The most common reasons LLC members end up in court — and how a good operating agreement prevents it.
Mistake
Operating without an agreement means state default rules govern your LLC — equal membership voting regardless of ownership percentage, unanimous consent for major decisions, and automatic dissolution on member departure in some states.
Mistake
LLC profits pass through to members who owe tax on them whether or not cash is distributed. Without a mandatory tax distribution, members can owe tens of thousands in tax with no cash from the LLC to pay it.
Mistake
Without transfer restrictions, a member can sell their interest to a stranger and that person becomes your co-owner. A right of first refusal gives existing members the option to buy before outside parties can enter.
Mistake
Operating agreements must comply with your formation state's LLC act. Generic templates often omit state-specific required provisions or include provisions that are void under your state's law.
Example
"Two-member LLC in Colorado. 70% / 30% split. Member-managed. Both members must approve major decisions. Annual distributions after 15% reserve. Right of first refusal on any transfer. Tax distributions mandatory. Buyout at appraised value on death or disability."
A 16-section operating agreement, Colorado LLC Act compliant. 70/30 membership interests. Member-managed with defined authority limits. Major decisions require both members. Annual distributions with 15% operating reserve. Mandatory tax distributions at 35% of allocated income. Right of first refusal on transfers. Appraised-value buyout on death or disability over 24-month payment period.
Word (.docx) for editing in any tool. PDF for sending out as-is. Both formats, no watermark, no account needed.
When to ask a lawyer
BizDraft is a drafting tool. It is not a substitute for a lawyer who knows your specific situation. Reach for one when:
When investors are entering the LLC, the operating agreement needs preferred-return provisions, anti-dilution protections, information rights, and other investor terms that require legal structuring.
Profits interests, different classes of membership, vesting schedules for sweat equity, and carried interest structures require a tax attorney and securities counsel to structure correctly.
If a member wants out and the parties disagree on valuation or the buyout process, get legal counsel before taking any action. Member disputes are easier to resolve with counsel than after positions have hardened.
FAQ
Not by federal law, but by most states' LLC acts it is strongly recommended and in some states (New York, California) required or assumed to exist. Without one, banks won't open accounts, sophisticated counterparties won't sign contracts, and courts may not fully honor the liability shield.
Yes. A single-member operating agreement establishes that the LLC is a separate legal entity from you personally, reinforces the liability protection, is required by banks to open a business account, and defines what happens to the LLC if you die or become incapacitated.
In a member-managed LLC, all members participate in day-to-day management. In a manager-managed LLC, one or more designated managers (who may or may not be members) run the business while passive members invest. Manager-managed is common when there are passive investors who don't want operational authority or liability.
By default, LLCs are pass-through entities — single-member LLCs are disregarded entities (reported on Schedule C), multi-member LLCs are taxed as partnerships (Form 1065, K-1s). Members pay tax on their share of LLC income whether or not it is distributed. An LLC can elect to be taxed as an S-Corp or C-Corp — consult a CPA before doing so.
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