US LLC operating agreement: what it is for, what it covers, who asks for it

The articles filed with the state, the Articles of Organization, fit on one page and say almost nothing: the company name, its registered agent, sometimes its organizer. Everything else, who owns what, who decides, how money leaves the company, sits in a document the state never sees: the operating agreement.

This guide explains what it is, whether it is mandatory, what it should contain, why banks and payment providers ask for it, and why a solo founder should sign one anyway.

What the operating agreement is, and what it is not

The operating agreement is a contract between the members of the LLC, or between the single member and the company, that sets out how it runs internally. It is not filed with the Secretary of State, it appears in no public registry, and nobody reads it unless you show it to them. It is roughly what a UK founder would call the articles of association, except that the public documents, the Articles of Organization, are minimal, while the operating agreement is private and detailed.

Its strength comes from LLC law: in Wyoming as in Delaware, the law lets members arrange almost everything by contract, and only imposes its default rules when there is no written agreement. Without an operating agreement, those default rules apply, and they are not always the ones you would have chosen: profits split equally whatever each member contributed, for example, or automatic dissolution in some cases when a member leaves.

Is it mandatory?

It depends on the state, and the answer has nuances. New York, California, Missouri and Maine require a written agreement; Delaware requires an agreement but accepts an oral one. Wyoming and New Mexico, the states non-residents use most, require nothing. In practice, that freedom changes nothing: the bank, Stripe, PayPal, Amazon and any serious partner ask for the document, and they ask for it signed. An LLC without an operating agreement can be formed, but it cannot open an account.

What it contains

A complete operating agreement answers about ten questions. Who the members are and what percentage each one holds. What each one contributed, in cash, equipment or work. How profits and losses are allocated, which can differ from the ownership split. Who manages the company, the members themselves or an appointed manager, and with what signing authority. How decisions are made and by what majority. How a member joins, leaves or sells their interest, and to whom. What happens on death or incapacity. And how the company is dissolved, in what order debts are paid and how the rest is shared.

Two provisions matter most for a non-resident. The company’s address, which must be the US business address used everywhere else, and the tax treatment clause, which states that the LLC is a pass-through entity, a disregarded entity with a single member or a partnership with several, unless an election is filed with the IRS. That clause reassures the bank and lines up with the Form 5472 the company files every year.

Why the bank, Stripe and the IRS ask for it

Mercury, Relay and Wise Business are legally required to identify the beneficial owner of every business customer. The Articles of Organization do not name the owner; the operating agreement does. It is therefore the document that links your passport to the company, and the one most often missing from a declined application, as our guide to opening a Mercury account shows. Stripe and PayPal follow the same logic when they verify the representative.

The IRS does not ask for the document, but it relies on what the document establishes. Form 5472 reports the foreign owner’s identity every year, along with the flows between the owner and the company: contributions, reimbursements, distributions. An operating agreement that sets those rules keeps the filing consistent from one year to the next. And in an audit, it is what proves the company has an existence of its own, separate from yours.

Single member: why write one anyway

A solo founder often wonders who they are signing a contract with. The answer comes down to two words: limited liability. An LLC protects your personal assets as long as it is treated as a separate entity. A court that finds no internal documents, commingled accounts and nothing to tell the company apart from the person can set that protection aside, what US lawyers call piercing the corporate veil. A single-member operating agreement is the first building block of that separation.

It also settles what nobody likes to plan for: who takes over the company if you die or become incapacitated, and how. Without that clause, the LLC can end up with no member, which triggers its dissolution in several states, with the accounts frozen while the estate is sorted out abroad.

Several members: the clauses that prevent disputes

With two or three members, the operating agreement becomes the only document that protects each of you from the others. The clauses that matter are the ones you negotiate before the first dollar comes in: each member’s percentage and the contribution behind it, the profit distribution rule, the payout schedule, a right of first refusal if a member sells, the value of an interest on exit, the procedure for a two-against-two deadlock, and a commitment not to start a competing business. Our article on single-member and multi-member LLCs explains what that choice also changes with the IRS.

Which language, and do you need a lawyer?

English. It is the language of the state, the bank and the courts that would enforce it, and a translation into your own language would only ever be a courtesy copy. A lawyer is not necessary for a single-member LLC, or for two members who agree on standard clauses: the document follows a proven template, and what matters is that it is complete, consistent with the articles and signed. A lawyer becomes useful again as soon as investors come in, contributions are unequal or a member contributes intellectual property.

What LLC Place provides

The operating agreement is included in every LLC Place plan from the first payment. It is generated in English from your answers to the formation questionnaire, single member or several, then signed electronically from your dashboard, where it stays available alongside your articles and your EIN letter for every bank application. The state filing, the EIN without a Social Security number, the registered agent and the business address are included in the same way. Only the annual IRS filings are optional, at €199 per year, or €398 per year with a dedicated tax expert, and they are included in the Pro and Founder plans.

Frequently asked questions

Is the operating agreement filed with the state?

No. It remains an internal document, kept by the company and shown to the bank or partners on request. Only the Articles of Organization are filed and made public.

Does a single-member LLC need an operating agreement?

Yes, in practice. The bank asks for it to identify the owner, and it protects limited liability by proving that the company is separate from the person. It also settles who takes over the company in the event of death.

Can the operating agreement be changed after formation?

Yes, through an amendment signed by the members, whenever a member joins or leaves, or the profit split or management structure changes. Nothing needs to be filed with the state, but the bank should receive the updated version.

Does the operating agreement need to be notarized?

No. An electronic signature by the members is enough in every state, and that is how it is signed from the LLC Place dashboard.