Banks Need Your Operating Agreement — Here's Why
Walk into any bank to open a business account for your LLC, and one of the first things they'll ask for is your operating agreement. Apply for a business loan, line of credit, or merchant services, and the same request follows. This isn't a formality — banks have specific, practical reasons for requiring this document.
Understanding what banks look for in your operating agreement helps you prepare a document that satisfies their requirements and opens the door to the financial services your LLC needs.
What Banks Are Looking For
Who Has Authority to Act
The primary reason banks want your operating agreement is to determine who can legally bind the LLC to financial transactions. They need to know:
- Who can open and close bank accounts
- Who has signatory authority on the accounts
- Who can authorize wire transfers
- Who can apply for credit on behalf of the LLC
- Who can sign loan documents
Without an operating agreement, the bank has no reliable way to verify that the person sitting across the desk actually has authority to act for the LLC. In a member-managed LLC, any member could potentially have authority. In a manager-managed LLC, only designated managers do. The operating agreement clarifies this.
Ownership Structure
Banks need to understand who owns the LLC and in what proportions. This is required for:
- KYC (Know Your Customer) compliance — banks must verify the identity of beneficial owners holding 25% or more of the LLC
- CDD (Customer Due Diligence) — regulatory requirements to understand the ownership and control structure
- FinCEN reporting — federal reporting requirements related to LLC ownership
Your operating agreement's membership section provides this information clearly.
Management Structure
Is the LLC member-managed or manager-managed? This determines who the bank can accept instructions from and who needs to sign documents. The operating agreement is the definitive source for this information.
Under the Corporate Transparency Act (effective since 2024), LLCs are required to report beneficial ownership information to FinCEN. Your operating agreement helps you identify who qualifies as a beneficial owner and ensures your FinCEN filings are consistent with your LLC's actual structure.
Types of Financial Services That Require Operating Agreements
Business Bank Accounts
Virtually every bank requires an operating agreement to open a business checking or savings account. Along with the operating agreement, they'll typically need:
- Articles of organization (certified by the state)
- EIN confirmation letter from the IRS
- Government-issued ID for authorized signers
- Initial deposit
Business Loans and Lines of Credit
Lenders review your operating agreement to understand:
- Whether the LLC (or its members) can take on debt
- Whether there are restrictions on borrowing
- Who has authority to sign loan documents
- Whether personal guarantees from members are required
- The LLC's capital structure and member contributions
Business Credit Cards
Credit card issuers need to verify authority and ownership. The operating agreement confirms who can apply on behalf of the LLC and who bears responsibility.
Merchant Services
Payment processors and merchant service providers want to verify the LLC's legitimacy and who controls it. The operating agreement provides this verification.
SBA Loans
The Small Business Administration requires extensive documentation for its loan programs, and an operating agreement is always on the list. SBA loans often have specific requirements about what the operating agreement must contain.
What to Include for Banking Purposes
Banking Resolution
Many operating agreements include a specific banking resolution provision that:
- Authorizes the LLC to open bank accounts at specified institutions
- Names individuals authorized as signers on the accounts
- Specifies any limitations (e.g., dual signatures required for checks over $10,000)
- Grants authority to use online banking, wire transfers, and ACH transactions
Some banks have their own banking resolution form that they require in addition to (or in lieu of) a provision in the operating agreement.
Authority Provisions
Make your authority provisions clear and specific:
- State explicitly who can enter into contracts and up to what dollar amount
- Identify who can take on debt and any borrowing limits
- Name authorized signers for financial transactions
- Address electronic banking authority
Member/Manager Identification
Include complete identification information for anyone with authority:
- Full legal names
- Titles or roles
- Specific authority granted
- Any limitations on authority
Before visiting the bank, call ahead and ask what specific documents they require and whether they have any specific provisions they want to see in your operating agreement. Some banks have templates or checklists that make the process smoother.
Common Issues When Banks Review Operating Agreements
Vague Authority Provisions
"Members shall manage the LLC" isn't specific enough. Banks want to see named individuals with clearly defined authority. Specify who can open accounts, sign checks, authorize transfers, and take on debt.
Inconsistencies Between Documents
If your operating agreement says one thing but your articles of organization say another, banks will flag the discrepancy. Make sure all your formation documents are consistent about management structure and authority.
Missing Members
If the operating agreement doesn't list all members with their ownership percentages, the bank can't verify compliance with KYC and CDD requirements. Make sure your membership list is current and complete.
No Banking Provisions
While not all operating agreements need a formal banking resolution, including one makes the account-opening process much smoother. If your operating agreement is silent on banking authority, the bank may require a separate resolution signed by all members.
Outdated Information
If your operating agreement hasn't been updated since formation but your membership or management structure has changed, the bank may decline to rely on it. Keep your operating agreement current.
Can You Open a Bank Account Without One?
Technically, some banks may open an account for an LLC without an operating agreement — particularly for single-member LLCs in states that don't require one. However:
- You'll have fewer banking options
- You may face higher scrutiny or restrictions
- You won't be able to get business loans or lines of credit without one
- Your LLC's liability protection may be weakened without this evidence of formal governance
The better question isn't whether you can operate without one, but why you would. Creating an operating agreement takes far less time than the frustration of being turned away by financial institutions.
Keeping Your Operating Agreement Bank-Ready
- Include clear authority provisions — name specific individuals and their banking authority
- Keep the membership list current — update it whenever members join or leave
- Include a banking resolution — even a brief one streamlines the account-opening process
- Maintain consistency — ensure your operating agreement matches your articles of organization and other filings
- Update promptly — amend the agreement whenever there's a change in management, membership, or authority
- Keep copies accessible — you'll need to provide a copy to every bank or lender you work with
Your operating agreement is your LLC's passport to the financial system. Make sure it's comprehensive, current, and ready to present whenever your business needs financial services.