Does your LLC need an operating agreement?


An LLC operating agreement is almost always worth having, even though it isn’t required by North Carolina state law. This is a document that puts into writing the way you want to run your LLC, ensuring that everyone understands what they are agreeing to – and legally holding them to that agreement.

What happens if I don’t have an operating agreement?

The state where the LLC was formed determines whether or not an operating agreement is required by law. It is not a requirement for this document to be filed.

But it’s not typically advisable to allow the state to handle your company’s operating agreement. If you don’t officially create an operating agreement for your LLC, state business laws will apply. These are highly general regulations and not the best way to manage your business operations.

Choosing a business structure that works for you and your company is essential to the success of the endeavor. An LLC is one option that provides robust personal protection without being tied up in as many formalities. When forming an LLC, an operating agreement is one piece of paperwork not to ignore.

What does an operating agreement do?

An official operating agreement is important because it summarizes the financial and functional decisions of the company. These decisions may be laid out in a combination of provisions, rules, and regulations.

Rather than verbal agreements, which may be too vague, written operating agreements make it so nothing is misunderstood or misremembered. This also provides you with something to refer back to whenever a conflict occurs.

An operating agreement is also created to set the internal rules for the company, spelling out how the business is going to be run. The contract goes into effect once it is signed by the LLC members, officially binding them to its terms.

You should keep your operating agreement confidential. It should be stored with the rest of your LLC’s core records somewhere safe, secure, and available when needed.