Does Your State Require an LLC Operating Agreement?
The answer depends on where your LLC is formed. While every LLC benefits from having an operating agreement, some states legally require one while others simply recommend it. Understanding your state's specific requirements ensures your LLC is compliant and properly protected.
States That Require an Operating Agreement
New York
New York is one of the strictest states regarding operating agreements. Under New York LLC Law Section 417, all LLCs — including single-member LLCs — must adopt a written operating agreement. The agreement must be adopted within 90 days of filing articles of organization.
Key provisions required by New York law:
- The agreement must be in writing (oral agreements don't satisfy the requirement)
- It must address the LLC's internal affairs
- Certain provisions cannot be waived, including members' access to records
California
California requires all LLCs to have an operating agreement under California Corporations Code Section 17701.10. The agreement can be oral or written, but a written agreement is strongly recommended for enforceability and proof.
California-specific considerations:
- California LLCs are subject to an annual $800 minimum franchise tax
- The operating agreement should address California's unique community property laws if spouses are members
- California's LLC act has specific provisions about fiduciary duties that the operating agreement can modify
Missouri
Missouri requires all LLCs to have an operating agreement. Under Missouri Revised Statutes Section 347.081, every LLC must adopt a written or oral operating agreement.
Maine
Maine requires an operating agreement for LLCs with more than one member. Single-member LLCs are not explicitly required to have one, though it's still recommended.
Delaware
While Delaware doesn't strictly "require" an operating agreement, the Delaware LLC Act gives extraordinary weight to whatever the operating agreement says. Delaware courts consistently defer to operating agreement provisions, making it one of the most operating-agreement-friendly states.
Delaware's LLC Act is uniquely flexible. It allows operating agreements to modify, restrict, or eliminate fiduciary duties — something most other states don't permit. If your LLC is formed in Delaware, your operating agreement carries exceptional legal weight and should be drafted with particular care.
States That Strongly Recommend (But Don't Require) Operating Agreements
Most states fall into this category. While they don't mandate operating agreements, their LLC statutes include default rules that apply in the absence of one. These defaults may not match your intentions.
Notable States and Their Default Rules
Texas — The Texas Business Organizations Code doesn't require an operating agreement but provides extensive default provisions. Without an agreement, Texas defaults to equal management rights for all members and equal profit sharing.
Florida — Florida's Revised LLC Act provides default rules that may not align with your goals. For example, the default is member-managed with equal voting rights regardless of ownership percentage.
Illinois — The Illinois LLC Act defaults to pro-rata profit distributions based on contributions, but unanimous consent is required for most major decisions — which can create gridlock.
Georgia — Georgia defaults to equal management rights and equal profit sharing. The operating agreement is the only way to establish a different arrangement.
Nevada — Known for business-friendly laws, Nevada doesn't require an operating agreement but its default rules may surprise you. Without one, each member has equal management rights.
Wyoming — One of the most LLC-friendly states, Wyoming doesn't require an operating agreement but provides flexible default rules. An operating agreement lets you take full advantage of Wyoming's permissive LLC statute.
What Default Rules Apply Without an Operating Agreement?
When your LLC doesn't have an operating agreement — or doesn't address a specific issue — state default rules fill the gaps. Here's what most states default to:
Profit and Loss Allocation
Most states default to one of two approaches:
- Equal shares — each member receives the same portion regardless of investment (common in states like Texas, Florida, Georgia)
- Proportional to contributions — based on each member's capital contribution (common in states like Illinois)
Management Structure
The default in virtually every state is member-managed, meaning all members have equal authority to act on behalf of the LLC. This can be problematic if some members are passive investors.
Voting Rights
Most states default to either per capita voting (one vote per member) or voting proportional to ownership interest. Check your state's specific default.
Transfer of Interests
Default rules typically allow members to transfer their economic interest (right to receive distributions) but not their management rights. This means a buyer gets the financial benefits but can't participate in decision-making without the other members' consent.
Dissolution
Default dissolution triggers vary by state but commonly include:
- Unanimous vote of members
- Death, withdrawal, or bankruptcy of a member (in some states)
- Court order
- Administrative dissolution by the state
Even in states that don't require an operating agreement, the default rules almost certainly don't reflect what you and your co-members actually want. Creating an operating agreement lets you override these defaults with provisions tailored to your business.
State-Specific Provisions to Consider
Community Property States
If your LLC operates in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), consider including provisions that address:
- Whether a member's spouse has any rights to their membership interest
- What happens to membership interests in a divorce
- Whether spousal consent is required for certain transactions
States with Franchise Taxes
Some states impose significant franchise taxes or fees on LLCs:
- California — $800 minimum annual franchise tax plus a fee based on gross receipts
- Delaware — $300 annual franchise tax
- Illinois — Annual report fee
- New York — Filing fees plus publication requirement
Your operating agreement should address how these state-specific costs are handled.
Series LLC States
A few states (Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah) allow Series LLCs — a single LLC with separate "series" that can have distinct members, assets, and liabilities. If you're forming a Series LLC, each series may need its own operating agreement or a comprehensive master agreement covering all series.
Multi-State Considerations
If your LLC operates in multiple states, be aware that:
- Your operating agreement is governed by the laws of the state where the LLC is formed, not where it operates
- You may need to register as a foreign LLC in states where you do business
- Some states may apply their own laws to certain aspects of the LLC's operations
Your operating agreement should specify the governing law (typically the state of formation) and address how conflicts between state laws are resolved.
Practical Recommendations
Regardless of your state's requirements:
- Always have a written operating agreement — even if your state allows oral agreements
- Keep it with your formation documents — store it with your articles of organization and other business records
- Review it annually — state laws change, and your agreement should stay current
- Understand your state's default rules — know what applies if your operating agreement doesn't address a specific issue
- Consider your state's unique provisions — community property, franchise taxes, series LLC options, and other state-specific factors
Your operating agreement should be tailored not just to your business but to the legal environment of the state where your LLC is formed. Taking the time to understand your state's specific requirements and default rules ensures your agreement provides the protection and clarity your business needs.