{"id":4871,"date":"2021-08-16T11:53:50","date_gmt":"2021-08-16T16:53:50","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/incorporation-and-legal-structures\/single-member-llc-operating-agreement.html"},"modified":"2025-10-15T23:51:00","modified_gmt":"2025-10-16T04:51:00","slug":"single-member-llc-operating-agreement","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/single-member-llc-operating-agreement.html","title":{"rendered":"Single-Member LLC Operating Agreement"},"content":{"rendered":"\n
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Single-Member LLC Operating Agreement<\/h1>\n\n
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\n By FindLaw Staff<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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A single-member LLC<\/span> operating agreement<\/span> is a legal document<\/span> that outlines the rules and structure for a limited liability company<\/span> with only one owner. This agreement details key operational procedures like management, profit distribution, and dissolution, and is typically required to open a business bank account<\/span> or secure financing.<\/p>\n\n <\/div>\n\n\n\n

Many sole proprietors want liability protection<\/span> for their business activities. So, they create a single-member\u00a0<\/span>limited liability company<\/span><\/a>\u00a0(LLC) with the secretary of state<\/span>. For business owners<\/span>\u00a0starting a new company<\/a>, understanding the importance of an LLC operating agreement is crucial. This document is not just a formality. It\u2019s a significant part of ensuring your business runs smoothly.<\/p>\n

In this article, we\u2019ll focus on single-member LLCs<\/span>. We will discuss how their operating agreements differ from other business entities.<\/p>\n

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What Is an LLC Operating Agreement?<\/h2>\n

An LLC operating agreement is a key legal document<\/span> for LLC owners<\/span>. It outlines how the business will run and includes basic information like the business purpose, capital contributions<\/span>, voting rights<\/span>, and how\u00a0profits and losses<\/a>\u00a0will be shared. The LLC operating agreement will have information on whether the LLC is\u00a0member managed<\/span> or manager managed<\/a>. In a member-managed<\/span> LLC, the owner directly oversees business affairs<\/span>. In a manager-managed LLC<\/span>, they appoint someone else to handle these tasks.<\/p>\n

If you form a corporation, you\u00a0create bylaws<\/a>\u00a0to govern your company. If you form an LLC<\/a>, you draft an operating agreement to do the same thing. Think of the operating agreement as a playbook for your company. This agreement helps the business be seen as a separate entity, protecting the owners\u2019 personal liability.<\/p>\n

Does a Single-Member LLC<\/span> Need<\/span> an Operating Agreement?<\/h2>\n

Yes. Even a single-member <\/span>LLC<\/span><\/a> needs<\/span> an operating agreement. It\u2019s a common belief that, with only one member, such an agreement might be unnecessary. However, having this document offers legal protection<\/span> and clarity. It reinforces the fact that the LLC is a separate entity, which is important for tax purposes<\/span> and personal liability. There are several reasons why an LLC needs an operating agreement, even if you are a sole member<\/span>.<\/p>\n

Necessary for Bank Accounts<\/span> and Financing<\/h3>\n

To open a business bank account<\/span>, a bank requires a copy of the LLC\u2019s operating agreement and the\u00a0articles of organization<\/span><\/a> or certificate of formation<\/span>. If you are looking for a bank loan or investment in your company, you will most likely need an operating agreement. The reason is that potential lenders and investors want to see how you have set up your organization. Additionally, they look for what happens upon your death or dissolution of the company<\/span>.<\/p>\n

Meets State Requirements<\/h3>\n

Some states, such as California, Delaware, Maine, Missouri, and New York, require LLCs to have operating agreements. It may jeopardize your LLC status with those states if you don\u2019t. And therefore, your liability protection<\/span> is at risk.<\/p>\n

Outlines Company Rules and Framework<\/h3>\n

The operating agreement sets forth the rules and management of the company<\/span>. State law<\/span> will govern if you do not mention how you want something handled. So, for example, if you want the LLC<\/a> to end after your death, you add a termination or\u00a0dissolution clause<\/a>. If you do not have such a clause, state law<\/span> might dictate that the LLC go to your heirs.<\/p>\n

Affirms Limited Liability Structure<\/h3>\n

One of the reasons you formed a limited liability company<\/span> is for protection from\u00a0business liability<\/a>. Therefore, if someone were to sue the LLC, they can only go after the assets in the LLC and not your personal assets<\/span>.<\/p>\n

You state in your operating agreement that the member of the LLC is not responsible for the debts, obligations, or liabilities arising from the business. Such a statement shows that you intend to operate as a limited liability business structure, not a\u00a0sole proprietorship<\/a>.<\/p>\n

What To Include in a Single-Member LLC<\/span> Operating Agreement<\/span><\/h2>\n

A single-member LLC<\/span> operating agreement<\/span> is very different from a\u00a0multimember LLC<\/span> operating agreement<\/a>. Namely, you are the sole owner and, therefore, the only member of the LLC.<\/p>\n

The provisions of your single-member LLC<\/span> operating agreement<\/span> should include:<\/p>\n