LegalFree tool
LLC Operating Agreement for Your Members
An operating agreement built on your actual deal: who owns what, how money is paid out, who decides and what happens when someone leaves.
Free to start · Opens in your River workspace, ready to edit and share
How to write an LLC operating agreement
An LLC operating agreement is the contract among the owners of a limited liability company, called members, that sets out how the company is owned and run. A good one records what each member put in and owns, how profits and cash are shared, who decides what, and what happens when a member leaves or dies. Wherever it is silent, your state's LLC law supplies the answer.
Above all, write down the deal you actually made, in numbers and in order. Your state's default rules were written for no business in particular.
What goes in an LLC operating agreement
Some states require one. New York's LLC law says members shall adopt a written operating agreement1 before the articles of organization are filed or within 90 days after. Whether the LLC has one owner or five, a complete agreement covers the parts below.
The parts of an operating agreement
| Part | What it settles |
|---|---|
| Basics | Name, purpose, office, registered agent, how long it lasts, and tax classification |
| Members and contributions | Who owns it, what each put in, its agreed value and each percentage |
| Money | Profit shares for tax, the order cash is paid out, and pay for work |
| Management and voting | Who runs it, who can sign for it, and which decisions need a vote |
| Duties | What owners owe the company, conflicts of interest, and whether owners may compete |
| Transfers | Whether an owner can sell or give away an interest, and how new owners join |
| Exits | Death, disability, divorce or withdrawal: the buyout price and how it's paid |
| Dissolution | How the company winds up, and who is paid in what order |
Record who put in what
List each member's contribution: cash, property such as equipment or a client list, or work. Give each one a dollar value you all accept, then set each member's percentage. Percentages don't have to follow the cash. An owner who runs the business can hold half for less money, if the agreement says so.
Decide, too, what happens if the business needs more cash and one owner can't pay in. The others might lend it, or that owner's percentage might shrink.
Still stuck on percentages? The founder equity split template scores what each owner brings and shows how each proposed weighting changes the split.
Ownership for work can be taxable
For an LLC taxed as a partnership, IRS Publication 541 says a member who gets a share of its capital for work generally must report its value as income2. A share of future profits generally isn't taxed when received. Ask an accountant before you write this clause.
Write the money in order
Without a clause, your state's LLC act splits the money. Delaware divides profits, losses and distributions by the agreed value of each member's contributions, as stated in the company's records3. In Minnesota, an LLC formed since August 2015 splits distributions in equal shares among members4, whoever put in more. Neither rule pays the owner who works, and neither repays an investor first while the business runs.
Allocations, which decide whose tax return reports each share of profit, are separate from distributions, which decide who gets cash and when. An LLC with two or more members is taxed as a partnership unless it elects otherwise. Each member may owe tax on their share of the income whether or not it's distributed5.
A tax distribution clause pays each member enough cash for that tax before each estimated payment is due. The small business tax deadline calendar lists the dates.
Pay for work separately. A fixed monthly amount for the member who runs the business is what the IRS calls a guaranteed payment, one determined without regard to the partnership's income2. In the example below, Dev put in $60,000 and stays out of the business, and Maria put in $40,000 and runs it.
5.1 Pay for work. The Company pays Maria $3,500 a month for managing the bakery, before any distribution.
5.2 Tax distributions. Before each estimated tax due date, the Company distributes to each Member 40% of that Member's estimated share of taxable income for the quarter, if cash allows. Each one is an advance against that Member's distributions under 5.3.
5.3 Other distributions. Any other cash the Members agree to distribute goes first to Dev until he has received $60,000 in total, then 50% to Maria and 50% to Dev.
- Work is paid as work. Maria's pay is fixed, so the 50/50 split rewards ownership, not hours.
- Cash for the tax bill. Each owner can pay their tax even in a year with no other payout. The 40% is a rate the owners pick.
- One written order. Dev's $60,000 comes back first. If Maria's $40,000 should too, the clause has to say so.
Decide who decides
Choose member-managed, where the owners run the company together, or manager-managed, where they appoint one or more managers. Manager-managed suits a company with a silent investor. Either way, list the decisions that need more than one owner's approval, and the vote each one needs.
- Borrowing or guaranteeing a loan above a set amount, such as $25,000
- Admitting a new member or issuing more ownership
- Selling the business or most of what it owns
- Signing a lease or contract longer than a year
- Hiring or paying a member, or a member's relative
- Changing the operating agreement
Two equal owners also need a deadlock rule, because a 50/50 vote has no majority. Options include a named tie-breaker, mediation, or a buy-sell clause: one owner names a price, and the other decides whether to buy or sell at it. Without a rule, a deadlock can end with a court dissolving the company.
Plan the exits while you still agree
Sooner or later an owner leaves, dies, divorces or falls out with the others. Without exit terms, the statute decides.
In Delaware, unless the agreement says otherwise, a member may not resign before the company winds up6. In Minnesota, a member's departure doesn't entitle them to a payout4. Either way, an owner who wants out can find their money stuck in the company.
A buyout clause settles five things:
- Triggers: death, disability, divorce, bankruptcy, stopping work in the business, or wanting out
- Buyer: the company or the other owners, with first refusal before any sale to an outsider
- Price: a formula, a value the owners update every year, or an independent appraisal
- Payment: a down payment, then the rest over a few years, so the business isn't drained
- Funding: life insurance on each owner, so the others can afford a buyout after a death
Sign it and keep it current
Every member signs, and the company keeps the signed copy with its formation filing. If the LLC is taxed as a partnership, the IRS requires it to name a partnership representative on each year's return unless it elects out7. That person alone acts for the company in an IRS audit and binds every member. The agreement should say who it is and require them to keep the others informed.
Amend the agreement in writing whenever the deal changes, and keep the LLC itself in good standing with the LLC annual filing requirements tracker.
Before everyone signs
- Each member's contribution, its value and their percentage are written down
- Allocations, distributions and pay for work each have their own clause
- Tax distributions arrive before each estimated tax due date
- Major decisions and the vote each needs are listed
- Equal owners have a deadlock rule, and every exit has a price method
- A partnership representative is named, if the LLC needs one
When to bring in a lawyer and an accountant
Have a lawyer review the draft if a member contributes property or receives ownership for work, or if you expect outside investors. Ask an accountant to check the tax clauses. This guide is general information about US law, not legal or tax advice.
The tool at the top of this page drafts the whole agreement from a few sentences about your deal, with every open decision marked.
How it works
Start with a few sentences about your company: who owns it, what each owner put in, who runs it and the state where it was formed. River drafts the full agreement around that deal in your workspace, including the order money is paid out, the votes big decisions need and the buyout when someone leaves. It checks your state's current statute before relying on any of its rules.
Where the owners haven't decided something, River writes a balanced default and marks it as a question for them. It marks missing facts to confirm and never invents names, amounts or percentages. With the draft, you get a list of open decisions, points specific to your state and questions for your accountant.
Describe your LLC
Name the owners, what each put in, who runs it and the state. Attach your filing or an existing agreement.
River drafts the agreement
It writes your deal into a full agreement for your state, for one owner or several.
Settle open decisions
Anything you haven't decided is marked as a question for the owners, with a balanced default in place.
Edit and adopt it
Change anything, or ask River for a consent adopting it, an amendment adding a member, or a plain summary.
What you get
- A full operating agreement for your state, for one owner or several, run by members or managers
- Each member's contribution, its agreed value and their percentage, recorded exactly as you agreed
- A step-by-step payout order, a tax distribution clause and pay for members who work in the business
- A list of major decisions that need a stated vote, plus a deadlock rule for equal owners
- Exit terms for withdrawal, death, disability and divorce, with a price method and payment terms
- Every open decision and missing fact marked in the draft, never filled with invented names, amounts or percentages
Common questions
What happens if an LLC doesn't have an operating agreement?
Your state's LLC statute supplies default rules, and they vary. Depending on the state, cash may be split by each owner's recorded contribution or equally per member. An owner who leaves may have no right to be paid out. A statute can't know your deal, such as a salary for the owner who works, so the agreement should spell it out.
Does a single-member LLC need an operating agreement?
Usually not by law, though some states, including New York and Missouri, require every LLC to adopt one. It is still worth having. It shows the business is run apart from your personal affairs and names who takes over if you die or can't work. It also shows a bank who can sign for the company.
What is the difference between member-managed and manager-managed?
In a member-managed LLC, the owners run the business together. In a manager-managed LLC, they appoint one or more managers to run it, who may be owners or outsiders, and usually vote only on major decisions. That suits a company where some owners invest but don't work in the business. If your formation filing names managers or members, keep it consistent with the agreement.
How do I write an LLC operating agreement with River?
In the box at the top of this page, type who owns the LLC, what each owner put in, who runs it and your state. Add anything else to settle, such as a salary or buyout terms. River drafts the full agreement into your free River workspace and marks every decision the owners still need to make.
Do I file the operating agreement with the state?
Usually not. The state gets your formation document, often called articles of organization or a certificate of formation, and the operating agreement stays in the company's own records. Keep the signed original with that filing and every later amendment. Lenders and investors may ask for a copy, and a buyer will check it during legal due diligence, so keep it current.
Do I need a lawyer to write an operating agreement?
No law requires one, and owners can write their own. A lawyer earns their fee when a member contributes property or gets ownership for work, when owners hold unequal votes and money rights, or when you expect outside investors. An accountant should review the allocation and tax distribution clauses. River's draft is a starting point, not legal or tax advice.
Is the LLC operating agreement generator free?
Yes, it is free to start. Your LLC operating agreement opens in a River workspace, where you can edit it, share it or ask River to change it. Paid plans add more AI use and access to the most advanced models.
Sources
New York State Senate. “Limited Liability Company Law Section 417: Operating agreement.” nysenate.gov (opens in a new tab)
IRS. “Publication 541 (12/2025), Partnerships.” irs.gov (opens in a new tab)
Delaware Code. “Chapter 18. Limited Liability Company Act, Subchapter V. Finance.” delcode.delaware.gov (opens in a new tab)
Minnesota Office of the Revisor of Statutes. “322C.0404 Sharing of and right to distributions before dissolution.” revisor.mn.gov (opens in a new tab)
IRS. “Partner’s Instructions for Schedule K-1 (Form 1065) (2025).” irs.gov (opens in a new tab)
Delaware Code. “Chapter 18. Limited Liability Company Act, Subchapter VI. Distributions and Resignation.” delcode.delaware.gov (opens in a new tab)
IRS. “Designate or change a partnership representative.” irs.gov (opens in a new tab)
Built by
Chandler Supple
Co-founder & CEO, River
Chandler has spent the last six years working in AI, building tools for millions of users and Fortune 100 companies. In 2025, he co-founded River to build a new kind of operating system for AI agents.