Does a Single-Member LLC Need an Operating Agreement?

Setting up a single-member LLC is an exciting step in starting your own business. An important part of the process is setting up an operating agreement.

With over 5.2 million new business applications filed in the US in 2024, many fledgling business owners are unsure whether they need this agreement.¹ As you’re working alone, it may seem unnecessary to draw up and sign an operating agreement.

This article breaks down why this internal document matters, even for solo entrepreneurs. We explain what it is, cover the legal requirements, and outline how to create one tailored to your business.

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Does a Single-Member LLC Need an Operating Agreement?

When creating a multi-member LLC, the two main documents required for formation are the articles of organization and an operating agreement. Most states do not legally require a single-member LLC to have an operating agreement. But it is still highly recommended to have one in place.

An operating agreement for a single-member LLC clarifies the owner's role and rights. Even as a solo entrepreneur, an operating agreement can help you avoid legal and financial complications in the future.

What Is an Operating Agreement?

An operating agreement is a binding legal document. It sets out the structure of the business and details its operating procedures and decision-making process.

An operating agreement for a single-member LLC clarifies the owner's role and rights. Even as a solo entrepreneur, an operating agreement can help you avoid legal and financial complications in the future.

You can create the document at any stage during the life of the LLC, but it is easier to do so when you start the business. As an internal governance document, it does not need to be in the public record. Unlike certificates of formation or articles of incorporation, operating agreements in most jurisdictions do not need to be filed with the state.

Why It Matters for Single-Member LLCs

An operating agreement helps establish clear rules for your company finances and taxes. It also states what should happen if you need to close the business. It indicates that you intend to operate the business with a limited liability structure rather than as a sole proprietorship. This means you are not personally responsible for any debts, obligations, or liabilities related to the business. After all, this is the reason you chose to form an LLC in the first place.

While your articles of organization might state that you are the company’s registered agent, the operating agreement confirms your position as the business owner. This also influences the way you register and file for taxes.²

You will need an operating agreement as well as company articles of organization to open a business bank account. Potential lenders and investors in your company will also want to see an operating agreement. This is to understand how you set up the business and prove that you own it.

Is An Operating Agreement Legally Required?

While most states do not legally require SM LLCs to have an operating agreement, a few states require one or strongly recommend it.³ These include California, Delaware, Maine, Missouri, and New York. Recommend it.³ But as we have seen, even in states where an agreement is not required, it is still beneficial to have one.

If you don’t have an operating agreement and a legal issue arises, courts could question whether your business is truly separate from your personal affairs. That can put your personal assets at risk. An operating agreement reinforces the “limited liability” protection of your LLC business. This is by documenting that you follow proper business procedures.

If you do not have an operating agreement that specifies certain details about how your company should be operated or dissolved, your state’s default LLC laws will apply and govern how your business operates. This may not fit with how you want to manage your company, which can potentially create problems in the future. For instance, if you do not detail how the LLC should be handled after your death, state law might dictate what will happen to it. If you want a specific person to take over the LLC, you must state this in the document.

Can I Write My Own Operating Agreement?

You can write your own operating agreement, especially if your business is relatively straightforward. There are many templates available online that you can fill out with your details. Be sure to understand what, if any, state-specific requirements apply. However, if you have complex assets, tax concerns, or plans for future growth, consult a lawyer.

In most jurisdictions, you’re not legally required to have your operating agreement notarized, although you may choose to do so.

Key Elements of a Single-Member LLC Operating Agreement

An operating agreement should detail a company’s operational procedures and financial rules. It should guide how the business will be managed. It does not need to spell out every detail, but it should be comprehensive enough to cover the significant issues of your LLC.
Here are the key elements it should include:

Basic Company Information

The operating agreement should state the LLC’s legal name, principal office address, and the state of formation. It should also specify the effective date of the agreement.

Business Purpose

Broadly describes the purpose of the business. This should give you the flexibility to expand the business and pursue future ventures without needing to amend the document.

Registered Agent Details

State the name and address of the LLC’s registered agent. This is the person or business authorized to receive legal and official documents on behalf of the LLC.

Statement of Limited Liability

The agreement should include a clear statement that the LLC is a separate legal entity. It should also specify that the member is not personally liable for business debts or legal obligations.

Ownership and Membership Structure

Clearly state that you are the sole member and manager of the LLC. List any capital contributions, outline voting rights, and clarify your rights and duties as the business owner.

Management and Decision-Making

Explain whether the LLC is member-managed or manager-managed. Most SMLLCs are member-managed. Set out your management authority and responsibilities. Include details on how business decisions will be made.

Financial and Tax Arrangements

Define how profits and losses are allocated, which is typically 100% to the sole member. Describe how and when the company will make distributions or retain earnings. This section should include your chosen tax classification and specify your accounting method (cash or accrual). It should also list who is responsible for record-keeping and financial reporting.

Indemnification and Liability Limitations

Add provisions to indemnify the member from personal liability for actions taken on behalf of the business, except in cases of gross negligence or misconduct.

Membership Changes and Transfers

Even for an Single Member LLC (SMLLC), it's helpful to include a section on how new members could be admitted in the future. This should also show how ownership interests may be transferred or sold. The section should state buyout or succession plans, especially for situations involving death, disability, or voluntary exit.

If you do add another member to your LLC in the future, you’ll need to replace the single-member operating agreement with a multi-member LLC operating agreement.

Business Succession and Dissolution Plan

Outline what happens if you sell the business or bring in a partner. Describe the process for voluntarily dissolving the LLC, or what happens in the event of your death or incapacity. Outline how assets and liabilities will be handled.

Amendments to the Agreement

State how you, as the sole member, can amend the agreement, including the need to document and sign any changes.

Benefits of Having an Operating Agreement

There are several benefits to having a formal operating agreement. These include:

• Avoiding disputes with banks and investors about how the business is run.
• Strengthening legal protection for your business as a legitimate entity, not a sole proprietorship in disguise.
• Clarifying business decision-making, even as a solo owner, helps maintain consistency and accountability.
• Providing flexibility, as the agreement can be tailored to your specific business.
• Avoiding default state rules governing your organization.

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	Editor & Business Expert:
	Panna is an expert in US business finance, covering topics from invoicing to international expansion. She creates guides and reviews to help businesses save time and make informed decisions. You can read more useful business articles on her author profile.

	Author:
	Nicole is a professional journalist with two decades of experience in writing and editing, she has also run her own freelance business for the past five years. Her expertise spans the financial and technology industries, including payment processing and small business banking.

Sources:
¹The State of American Business Data Center 2025 | U.S. Chamber of Commerce
²Single member limited liability companies | Internal Revenue Service
³Single-Member LLC Operating Agreement - FindLaw
All sources checked June 2025.