This template is an operating agreement for a member-managed limited liability company with voting and nonvoting classes of membership interests. This template includes practical guidance, alternate clauses, and drafting notes. An operating agreement establishes the rights and obligations of the LLC, its members and managers with respect to the LLC's organization, management and eventual dissolution; the powers of the manager(s); the members' capital contributions and rights to distributions; voting rights; rights of first refusal; and more. Notwithstanding the significant and important role an operating agreement can play in the management and operation of an LLC, very few jurisdictions mandate the adoption of an operating agreement. See the image below to see which states mandate the adoption of an operating agreement. Visualization of the Map of States Requiring Operating Agreements Source: Operating Agreement and Initial Filing Requirements State Law Survey (LLC), Current as of 06/10/2022 Operating agreements may be written or verbal, and while most jurisdictions allow either, some jurisdictions require operating agreements be in writing. See the image below to see which states require the use of a writing or some other template. Visualization of the Map of States Requiring Operating Agreements Be Written Source: Operating Agreement and Initial Filing Requirements State Law Survey (LLC), Current as of 06/10/2022 Every limited liability company (LLC) should be governed by an operating agreement, which serves as bylaws, a shareholder agreement and an equity purchase agreement combined into one. A limited liability company operating agreement is entered into among the members of an LLC upon the filing of the LLC's certificate of organization (also called a certificate of formation or articles of organization in some states), or even immediately beforehand in contemplation of the filing. This type of structure with management by the members with voting interests is often used when the owners of a new business want to attract new investments in order to expand the business without ceding operational control of the company. In drafting such a limited liability company operating agreement, the owners need to balance their desire to retain control against the risk that potential investors may be deterred for fear of being entirely at the mercy of the controlling members. On the other hand, investors may in some circumstances prefer that the founders of a company retain control without interference, particularly if the founders are viewed as "visionaries" or as having shown peculiar skill in making the company successful. Agreements of this type need to be customized for each transaction or situation. Thus, this agreement should be viewed only as a partial template. This template has been updated as needed to reflect the revised Internal Revenue Code provisions governing IRS tax audits of partnerships and other entities taxed as partnerships; these rules were passed in the Bipartisan Budget Act of 2015 and took effect on January 1, 2018. For further information, see Partnership Tax Audit Rules. See also Partnership and Other Pass-Through Entities Taxation and Partnership Tax Audit Clauses (Bipartisan Budget Act of 2015). To further compare state laws on Operating Agreements, see the following topic in the Business Entities State Law Comparison Tool : Limited Liability Company. For a full listing of related private equity and ancillary agreements in M&A transactions content, see Private Equity Transactions Resource Kit and Ancillary Agreements in M&A Transactions Resource Kit.