A Simple Starter Template for New Business Owners
Important: This sample is provided for educational purposes only and is intentionally simplified. LLC laws vary by state, and every business has different needs. Business owners should consult an attorney and tax professional before relying on any operating agreement.
Why Even a Simple Operating Agreement Matters
Many small business owners start an LLC without documenting expectations between owners. Even a short operating agreement can help reduce disputes by addressing ownership, voting rights, profit sharing, and what happens if someone leaves the business.
A basic agreement also helps reinforce that the business is operating as a separate legal entity, which is an important part of maintaining liability protection.
For businesses with multiple investors, family members, or long-term succession goals, a more detailed agreement is usually appropriate.
FARLEY LAW BASIC LLC OPERATING AGREEMENT
This Operating Agreement (“Agreement”) is entered into as of __________, by and among the following Members of _____________________ LLC (“Company”):
| Member Name | Ownership Percentage |
|---|---|
| ____________________ | _______% |
| ____________________ | _______% |
| ____________________ | _______% |
1. Formation
The Members have formed a limited liability company under the laws of the State of __________________.
2. Purpose
The purpose of the Company is to engage in any lawful business activity permitted under state law.
3. Capital Contributions
Each Member agrees to contribute the following initial capital to the Company:
| Member Name | Contribution |
|---|---|
| ____________________ | $__________ |
| ____________________ | $__________ |
| ____________________ | $__________ |
No Member is required to contribute additional capital unless all Members agree in writing.
4. Management
The Company will be:
☐ Member-Managed
☐ Manager-Managed
If Manager-Managed, the initial Manager(s) shall be:
The Manager or Members may make ordinary business decisions on behalf of the Company.
5. Voting
Each Member’s voting power is based on ownership percentage unless otherwise agreed in writing.
Major decisions require approval of Members holding more than fifty percent (50%) of ownership interests include:
- Admitting new Members
- Borrowing significant funds
- Selling substantially all Company assets
- Dissolving the Company
6. Profits and Distributions
Company profits and losses are allocated according to ownership percentages.
Cash distributions are made at times determined by the Members or Manager, subject to the Company maintaining adequate reserves for expenses and obligations.
7. Restrictions on Transfer
No Member may sell, assign, or transfer their ownership interest without first offering it to the remaining Members on the same terms.
Any transfer must be approved by Members holding a majority of the remaining ownership interests.
8. Death, Disability, or Withdrawal
If a Member dies, becomes permanently disabled, or voluntarily withdraws from the Company, the remaining Members may purchase that Member’s ownership interest.
Unless otherwise agreed, the purchase price will be determined by:
☐ Agreement of the Members
☐ Independent appraisal
☐ Book value of the Company
Payment terms may be made in installments if agreed by the parties.
9. Records and Banking
The Company must maintain appropriate business records and separate bank accounts in the Company’s name.
10. Governing Law
This Agreement shall be governed by the laws of the State of __________________.
11. Amendments
This Agreement may be amended only by written agreement signed by Members holding at least _______% of the ownership interests.
12. Signatures
The Members agree to the terms of this Operating Agreement.
| Member Name | Signature | Date |
|---|---|---|
| ____________________ | ____________________ | __________ |
| ____________________ | ____________________ | __________ |
| ____________________ | ____________________ | __________ |