Free LLC Operating Agreement

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Frequently Asked Questions

What is a Limited Liability Company (LLC)?A limited liability company (LLC) is a business entity that enjoys the attractive features of both a partnership and a corporation:
  • An LLC is similar to a corporation in that the liability exposure of individual members is limited to what each member has invested in the business.
  • Like a partnership, an LLC can be taxed only at one level. Income passes through and is only taxed against individual members as personal income. In contrast, a corporation is taxed first on profits at the corporate level and then as personal income tax on dividends at the shareholder level.
How is an LLC created?A limited liability company must be registered in the state where the company will operate. This is accomplished by preparing and filing a document called the Articles of Organization. The Articles of Organization must conform with the reporting requirements of your state. All states have a blank copy of the Articles of Organization available for download on the state website.How do I file my Operating Agreement?You do not need to file your LLC Operating Agreement. The Operating Agreement is simply an agreement between the owners (members) of the LLC. To register an LLC you must prepare and file a document called the Articles of Organization. All states have a blank copy of the Articles of Organization available for download on the state website.Why is Governing Law important?Laws affecting LLC's are different between states. Select the state in which your LLC will primarily do business. You will be asked questions specific to your state. The final document will be specific to your state. In addition, the laws of the state you select will be used to enforce this agreement and will be used to help resolve any disputes.
Your LLC Operating AgreementUpdate Preview


This Operating Agreement (the "Agreement") made and entered into this 1st day of September, 2015 (the "Execution Date"),


_________________________ of ________________________________________

(the "Member").


A. The Member wishes to be the sole member of a limited liability company.

B. The terms and conditions of this Agreement will govern the member within the limited liability company.

IN CONSIDERATION OF and as a condition of the Members entering into this Agreement and other valuable consideration, the receipt and sufficiency of which is acknowledged, the parties to this Agreement agree as follows:

  1. Formation
  2. By this Agreement the Member forms a Limited Liability Company (the "Company") in accordance with the laws of the Commonwealth of Virginia. The rights and obligations of the Member will be as stated in the Virginia Limited Liability Company Act (the "Act") except as otherwise provided here.
  3. Name
  4. The name of the Company will be __________.
  5. Purpose
  6. ____________________________________________________________.
  7. Term
  8. The Company will continue until terminated as provided in this Agreement or may dissolve under conditions provided in the Act.
  9. Place of Business
  10. The Principal Office of the Company will be located at _________________________ or such other place as the Members may from time to time designate.
  11. Capital Contributions
  12. The following is a list of all Members and their Initial Capital Contributions to the Company. Each of the Members agree to make their Capital Contributions to the Company, full and on time, according to the following terms:


    Contribution Description

    Value of




    1 Sep 2015

  13. Distribution of Profits/Losses
  14. Subject to the other provisions of this Agreement, the Net Profits or Losses of the Company, for both accounting and tax purposes, will accrue to and be borne by the sole Member:

    _________________________ of ________________________________________.
  15. Distributions will be made according to the following schedule: ___________________________________________________________
  16. Tax Allocations will be borne entirely by the sole Member:

    _________________________ of ________________________________________.
  17. No Member will have priority over any other Member for the distribution of Net Profits or Losses.
  18. Voting
  19. Each Member will be entitled to cast votes on any matter based upon the proportion of that Member's Capital Contributions in the Company.
  20. Nature of Interest
  21. A Member's interest in the Company will be considered personal property.
  22. A Member's ownership interest in the Company will be represented by a certificate issued by the Company.
  23. Withdrawal of Contribution
  24. No Member will withdraw any portion of their Capital Contribution without the unanimous consent of the other Members.
  25. Liability for Contribution
  26. A Member's obligation to make their required Capital Contribution can only be compromised or released with the consent of all remaining Members or as described elsewhere in this Agreement. If a Member does not make the Capital Contribution when it is due, he is obligated at the option of the remaining Members to contribute cash equal to the agreed value of the Capital Contribution. This option is in addition to and not in lieu of any others rights, including the right to specific performance that the Company may have against the Member.
  27. Additional Contributions
  28. Capital Contributions may be amended from time to time, according to the requirements of the Company provided that the Members' interests are not affected, except with the unanimous consent of the Members. No Member will be required to make Additional Contributions. Whenever additional capital is determined to be required and an individual Member is unwilling or unable to meet the additional contribution requirement within a reasonable period, as required by business obligations, the remaining Members may contribute in proportion to their existing Capital Contributions to resolve the amount in default. In such case the allocation of Net Profits or Losses of the Company among all the Members may be adjusted to reflect the aggregate change in Capital Contributions by the Members.
  29. Any advance of money to the Company by any Member in excess of the amounts provided for in this Agreement or subsequently agreed to, will be deemed a debt due from the Company rather than an increase in the Capital Contribution of the Member. This liability will be repaid with interest at such rates and times to be determined by a majority of the Members. This liability will not entitle the lending Member to any increased share of the Company's profits nor to a greater voting power. Resolution of such debts may have preference or priority over any other payments to Members as may be determined by a majority of the Members.
  30. Capital Accounts
  31. An individual capital account will be maintained for each Member and their initial Capital Contribution will be credited to this account. Any Additional Contributions made by any Member will be credited to that Member's individual Capital Account.
  32. Interest on Capital
  33. No borrowing charge or loan interest will be due or payable to any Member on their agreed Capital Contribution inclusive of any agreed Additional Contributions.
  34. Drawing Accounts
  35. An individual drawing account will be maintained for each Member. Each Member will be entitled to draw against their share of the profits in such amounts and at such time as will be agreed by the Members. The drawing account is a temporary account and is expected to have a debit balance if there have been any withdrawals. At the end of each accounting year, the drawing accounts are closed by transferring the debit balance to each Member's capital account.
  36. Compensation of Members for Services Rendered
  37. Members will not be compensated by the Company for services rendered to or on behalf of the Company, except reimbursement for expenses directly related to the operation of the Company.
  38. Management
  39. Management of this Company is vested in the Members.
  40. Authority to Bind Company
  41. Only the following individuals have authority to bind the Company in contract: ___________________________________________________________
  42. Duty to Devote Time
  43. Each Member will devote such time and attention to the business of the Company as the majority of the Members will from time to time reasonably determine for the conduct of the Company business.
  44. Member Meetings
  45. Member meetings will be held at the following address, or any other location that the Members may from time to time designate: ______________________________.
  46. Any impending Member meeting will require ______________________________ notice be given to all Members.
  47. A meeting may be called by any Member providing that appropriate notice has been provided to the other Members.
  48. There must be at least 0.00% of the Members present at a meeting for any decisions to be binding.
  49. Admission of New Members
  50. A new Member may only be admitted to the Company with a unanimous vote of the existing Members.
  51. The new Member agrees to be bound by all the covenants, terms, and conditions of this Agreement, inclusive of all current and future amendments. Further, a new Member will execute such documents as are needed to effect the admission of the new Member. Any new Member will receive such business interest in the Company as determined by a unanimous decision of the other Members.
  52. Voluntary Withdrawal of a Member
  53. Any Member will have the right to voluntarily withdraw from the Company. Written notice of intention to withdraw must be served upon the remaining Members at least __________ prior to withdrawal.
  54. The voluntary withdrawal of a Member will result in the dissolution of the Company.
  55. It remains incumbent on the withdrawing Member to exercise this dissociation in good faith and to minimize any present or future harm done to the remaining Members as a result of the withdrawal.
  56. Involuntary Withdrawal of a Member
  57. Events leading to the involuntary withdrawal of a Member from the Company will include but not be limited to: death of a Member; Member mental incapacity; Member disability preventing reasonable participation in the Company; Member incompetence; breach of fiduciary duties by a Member; criminal conviction of a Member; Operation of Law against a Member or a legal judgment against a Member that can reasonably be expected to bring the business or societal reputation of the Company into disrepute. Expulsion of a Member can also occur on application by the Company or another Member, where it has been judicially determined that the Member: has engaged in wrongful conduct that adversely and materially affected the Company's business; has willfully or persistently committed a material breach of the Operating Agreement or of a duty owed to the Company or to the other Members; or has engaged in conduct relating to the Company's business that makes it not reasonably practicable to carry on the business with the Member.
  58. The involuntary withdrawal of a Member will result in the dissolution of the Company.
  59. Dissociation of a Member
  60. Where the dissociation of a Member for any reason results in the dissolution of the Company then the Company will proceed in a reasonable and timely manner to dissolve the Company, with all debts being paid first, prior to any distribution of the remaining funds. Valuation and distribution will be determined as described in the Valuation of Interest section of this Agreement.
  61. The remaining Members retain the right to seek damages from a dissociated Member where the dissociation resulted from a malicious or criminal act by the dissociated Member or where the dissociated Member had breached their fiduciary duty to the Company or was in breach of this Agreement or had acted in a way that could reasonably be foreseen to bring harm or damage to the Company or to the reputation of the Company.
  62. Assignment of Interest
  63. In the event that a Member’s interest in the company is transferred or assigned as the result of a court order or Operation of Law, the trustee in bankruptcy or other person acquiring that Member's interest in the Company will only acquire that Member's economic rights and interests and will not acquire any other rights of that Member or be admitted as a Member of the Company or have the right to exercise any management or voting interests.
  64. Valuation of Interest
  65. In the absence of a written agreement setting a value, the value of the Company will be based on the fair market value appraisal of all Company assets (less liabilities) determined in accordance with generally accepted accounting procedures. This appraisal will be conducted by an independent accounting firm agreed to by all Members. An appraiser will be appointed within a reasonable period of the date of withdrawal or dissolution. The results of the appraisal will be binding on all Members. A withdrawing Member's interest will be in proportion to their profit and loss share in the Company, less any outstanding liabilities a Member may have to the Company.
  66. No allowance will be made for goodwill, trade name, patents or other intangible assets, except where those assets have been reflected on the Company books immediately prior to valuation.
  67. Dissolution
  68. The Company may be dissolved by a unanimous vote of the Members. The Company will also be dissolved on the occurrence of events specified in the Act.
  69. Upon Dissolution of the Company and liquidation of Company property, and after payment of all selling costs and expenses, the liquidator will distribute the Company assets to the following groups according to the following order of priority:
    1. in satisfaction of liabilities to creditors except Company obligations to current Members;
    2. in satisfaction of Company obligations to current Members to pay debts; and
    3. to the Members in proportion to their profit and loss share in the Company.
  70. The claims of each priority group will be satisfied in full before satisfying any claims of a lower priority group. Any excess of Company assets after liabilities or any insufficiency in Company assets in resolving liabilities under this section will be resolved by the Members in proportion to the profit and loss share of each Member as set out in this Agreement.
  71. Records
  72. The Company will at all times maintain accurate records of the following:
    1. Information regarding the status of the business and the financial condition of the Company.
    2. A copy of the Company federal, state, and local income taxes for each year (promptly after becoming available).
    3. Name and last known business, residential, or mailing address of each Member, as well as the date that person became a Member.
    4. A copy of this Agreement and any articles or certificate of formation, as well as all amendments, together with any executed copies of any written powers of attorney pursuant to which this Agreement, articles or certificate, and any amendments have been executed.
    5. The cash, property, and services contributed to the Company by each Member, along with a description and value, and any contributions that have been agreed to be made in the future.
  73. Each Member has the right to demand, within a reasonable period of time, a copy of any of the above documents for any purpose reasonably related to their interest as a Member of the Company, at their expense.
  74. Books of Account
  75. Accurate and complete books of account of the transactions of the Company will be kept and at all reasonable times be available and open to inspection and examination by any Member. The Books of Account will be kept on the cash basis method of accounting.
  76. Banking and Company Funds
  77. The funds of the Company will be placed in such investments and banking accounts as will be designated by the Members. All withdrawals from these accounts will be made by the duly authorized agent or agents of the Members as agreed by unanimous consent of the Members. Company funds will be held in the name of the Company and will not be commingled with those of any other person or entity.
  78. Audit
  79. Any of the Members will have the right to request an audit of the Company books. The cost of the audit will be borne by the Company. The audit will be performed by an accounting firm acceptable to all the Members. Not more than one (1) audit will be required by any or all of the Members for any fiscal year.
  80. Fiscal Year End
  81. The fiscal year end of the Company is the day of .
  82. Tax Treatment
  83. This Company is intended to be treated as a partnership, for the purposes of Federal and State Income Tax.
  84. Tax Matters Partner
  85. The tax matters partner will be _________________________, (the "Tax Matters Partner"). The Tax Matters Partner will prepare, or cause to be prepared, all tax returns and reports for the Company and make any related elections that the Members deem advisable.
  86. A Tax Matters Partner can voluntarily withdraw from the position of Tax Matters Partner or can be appointed or replaced by a majority of the Voting Members. In the event of a withdrawal of the Tax Matters Partner from the Company, the remaining Members will appoint a successor as soon as practicable.
  87. Annual Report
  88. As soon as practicable after the close of each fiscal year, the Company will furnish to each Member an annual report showing a full and complete account of the condition of the Company including all information as will be necessary for the preparation of each Member's income or other tax returns. This report will consist of at least:
    1. A copy of the Company's federal income tax returns for that fiscal year.
  89. Goodwill
  90. The goodwill of the Company will be assessed at an amount to be determined by appraisal using generally accepted accounting procedures.
  91. Governing Law
  92. The Members submit to the jurisdiction of the courts of the Commonwealth of Virginia for the enforcement of this Agreement or any arbitration award or decision arising from this Agreement.
  93. Mediation and Arbitration
  94. In the event a dispute arises out of or in connection with this Agreement, the parties will attempt to resolve the dispute through friendly consultation. If the dispute is not resolved within a reasonable period then any or all outstanding issues may be submitted to mediation in accordance with any statutory rules of mediation. If mediation is not successful in resolving the entire dispute or is unavailable, any outstanding issues will be submitted to final and binding arbitration in accordance with the laws of the Commonwealth of Virginia. The arbitrator's award will be final, and judgment may be entered upon it by any court having jurisdiction within the Commonwealth of Virginia.
  95. Force Majeure
  96. A Member will be free of liability to the Company where the Member is prevented from executing their obligations under this Agreement in whole or in part due to force majeure, such as earthquake, typhoon, flood, fire, and war or any other unforeseen and uncontrollable event where the Member has communicated the circumstance of the event to any and all other Members and where the Member has taken any and all appropriate action to satisfy his duties and obligations to the Company and to mitigate the effects of the event.
  97. Forbidden Acts
  98. No Member may do any act in contravention of this Agreement.
  99. No Member may permit, intentionally or unintentionally, the assignment of express, implied or apparent authority to a third party that is not a Member of the Company.
  100. No Member may do any act that would make it impossible to carry on the ordinary business of the Company.
  101. No Member will have the right or authority to bind or obligate the Company to any extent with regard to any matter outside the intended purpose of the Company.
  102. No Member may confess a judgment against the Company.
  103. Any violation of the above forbidden acts will be deemed an Involuntary Withdrawal of the offending Member and may be treated accordingly by the remaining Members.
  104. Indemnification
  105. All Members will be indemnified and held harmless by the Company from and against any and all claims of any nature, whatsoever, arising out of a Member's participation in Company affairs. A Member will not be entitled to indemnification under this section for liability arising out of gross negligence or willful misconduct of the Member or the breach by the Member of any provisions of this Agreement.
  106. Liability
  107. A Member or any employee will not be liable to the Company or to any other Member for any mistake or error in judgment or for any act or omission believed in good faith to be within the scope of authority conferred or implied by this Agreement or the Company. The Member or employee will be liable only for any and all acts and omissions involving intentional wrongdoing.
    1. breach of the duty of loyalty;
    2. a financial benefit received by the member or employee to which the member or employee is not entitled;
    3. a breach of a duty in relation to improper distributions as described in the Act;
    4. intentional infliction of harm on the company or a member; or
    5. an intentional violation of criminal law.
  108. Liability Insurance
  109. The Company may acquire insurance on behalf of any Member, employee, agent or other person engaged in the business interest of the Company against any liability asserted against them or incurred by them while acting in good faith on behalf of the Company.
  110. Life Insurance
  111. The Company will have the right to acquire life insurance on the lives of any or all of the Members, whenever it is deemed necessary by the Company. Each Member will cooperate fully with the Company in obtaining any such policies of life insurance.
  112. Amendment of Operating Agreement
  113. No amendment or modification of this Agreement will be valid or effective unless in writing and signed by all the Members.
  114. Title to Company Property
  115. Title to all Company property will remain in the name of the Company. No Member or group of Members will have any ownership interest in Company property in whole or in part.
  116. Miscellaneous
  117. Time is of the essence in this Agreement.
  118. This Agreement may be executed in counterparts.
  119. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in a neutral gender include the masculine gender and the feminine gender and vice versa.
  120. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
  121. This Agreement contains the entire agreement between the parties. All negotiations and understandings have been included in this Agreement. Statements or representations that may have been made by any party to this Agreement in the negotiation stages of this Agreement may in some way be inconsistent with this final written Agreement. All such statements have no force or effect in respect to this Agreement. Only the written terms of this Agreement will bind the parties.
  122. This Agreement and the terms and conditions contained in this Agreement apply to and are binding upon the Member's successors, assigns, executors, administrators, beneficiaries, and representatives.
  123. Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to the parties at the addresses contained in this Agreement or as the parties may later designate in writing.
  124. All of the rights, remedies and benefits provided by this Agreement will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.
  125. Definitions
  126. For the purpose of this Agreement, the following terms are defined as follows:
    1. "Additional Contribution" means Capital Contributions, other than Initial Contributions, made by Members to the Company.
    2. "Capital Contribution" means the total amount of cash, property, or services contributed to the Company by any one Member.
    3. "Initial Contribution" means Capital Contributions made by any Member to acquire an interest in the Company.
    4. "Net Profits or Losses" means the net profits or losses of the Company as determined by generally accepted accounting principles.
    5. "Operation of Law" means rights or duties that are cast upon a party by the law, without any act or agreement on the part of the individual including, but not limited to, an assignment for the benefit of creditors, a divorce, or a bankruptcy.
    6. "Principal Office" means the office whether inside or outside the Commonwealth of Virginia where the executive or management of the Company maintain their primary office.

IN WITNESS WHEREOF the parties have duly affixed their signatures under hand and seal on this 1st day of September, 2015.



in the presence of:


Witness: ______________________ (Sign)



Witness Name: ______________________


_________________________ (Member)

LLC Operating Agreement

Alternate Names:

An LLC Operating Agreement is also known as:

  • Operating Agreement
  • Limited Liability Company Operating Agreement
  • LLC Agreement
  • Operating Agreement for LLC

What is a Limited Liability Company (LLC)?

An LLC is a type of business structure formed by filing the proper paperwork with your state. Like the name suggests, an LLC limits the liability of its members, meaning they are not personally responsible for the company's debt or obligations.

What is an LLC Operating Agreement?

An LLC Operating Agreement is a legal document that establishes the rights and responsibilities of each LLC member and provides details about the LLC's internal management, including how decisions are made, when meetings are held, how new members are admitted and more.

Who is considered a member of an LLC?

A member of a limited liability company is an individual or corporation that owns part of the LLC. He or she must have provided a form of capital contribution (money, services, property) in exchange for a percentage of ownership interest in the company.

Does an LLC have shares of stock like a corporation?

LLC's don't have shares like a corporation, but rather assign a percentage of ownership according to each member's capital contribution. Regardless of the amount of members in an LLC, ownership percentages should always add up to 100%.

What does an LLC Operating Agreement include?

LLC Information

The LLC Operating Agreement has information about the LLC itself, including the name, type/description of services, how long the LLC will be in business, and office address.

Member Information

The LLC agreement includes the following information for each member:

  • Name and address
  • Membership class
  • Capital contribution
  • Percentage of ownership
  • Share of profits and losses

An operating agreement also addresses whether a member can voluntarily leave the LLC, if they can compete against the LLC after leaving, how assets are distributed if the company dissolves, and how new members are admitted.


An LLC Operating Agreement specifies how the company will be managed, including how decisions will be made and if actions require a majority of members to vote in favor of decisions (referred to as unanimous consent).

Regular meetings are part of an LLC's obligations, which is why details regarding where and when meetings will be held are important to include in the operating agreement.

An LLC can be managed either by its members or by a designated manager.


Financial and administrative aspects of an LLC are defined in the operating agreement, including the LLC's accounting methods, fiscal year, annual report details and more.

Other Details in an LLC Agreement

The operating agreement may also specify who has the ability to sign contracts on behalf of the company and methods used to resolve disputes.

Why should an LLC use an Operating Agreement?

By creating and agreeing to all the terms laid out in an operating agreement, members find there are fewer discrepancies in how business is conducted or how profits and losses are distributed.

An LLC Operating Agreement also allows members to specify their own rules for the company, and will serve as an important reference tool if a member decides to withdraw, the company dissolves, or a new member is admitted.

What is the difference between a partnership and an LLC?

A general partnership and an LLC are similar but members of an LLC have limited liability for the debts and obligations of the LLC. In a general partnership, partners have unlimited liability for the debts and obligations of the partnership.

Can members amend (change) terms in the LLC Operating Agreement?

Yes, an operating agreement can be amended if every member agrees and signs an amendment.

Related Documents:

  • Partnership Agreement: Contract used to spell out the terms of a general partnership between two or more partners.
  • Shareholder Agreement: Similar to an LLC Operating Agreement, but it is used by shareholders to define management details, how disputes are resolved, share value and more in a corporation.
  • Articles of Incorporation: Documents filed with the government to register your business as a corporation.
  • Business Plan: A comprehensive document that outlines your company's values, future goals, financial projections, marketing and sales plan, and employee/management details.
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