If you’ve heard your Washington LLC needs an operating agreement, but don’t exactly know why, where to get one, or even what it is, you’re not alone. We’re here to help make sure your questions are answered and you can confidently move forward in the best way for your business.
In this resource, we’ll explore the crucial role of an operating agreement including:
An operating agreement is an internal, contractual document for an LLC. It is a legally binding agreement that lists the members and/or managers of the business, their duties and responsibilities, financial investments and distributions, and resolution plans for internal company disputes.
Simplified, it’s a business contract outlining how an LLC functions by listing who does what, when, and how within the company.
In our office, we’ve compared it to being a business’s pre-nup, because it shows what the partners bring into the arrangement, their commitments, and what happens when things don’t go to plan.
An operating agreement and the articles of organization are both essential documents for an LLC, but they have very different roles for the business.
The articles of organization is the document filed with the secretary of state to form the LLC. The operating agreement is not filed with the secretary of state (or any government entity) and is used internally to define the way the business operates.
In Washington, the LLC’s articles of organization list the members/managers of the company. The operating agreement also lists those same individuals, but instead of just listing the three names of the members, the operating agreement would include things like what percentage of ownership each member has, and their specific duties within the LLC.
The primary purpose of an operating agreement is to establish the internal rules, structure, and management for an LLC. While not required by the state of Washington to start an LLC, it is highly recommended to ensure clear governance within the business.
Beyond internal operations, an operating agreement may also be requested or required by third parties as your LLC does business. Most commonly, banks and other financial institutions typically require a copy of an operating agreement to open a business account.
The most essential aspect of an operating agreement is that it be signed and dated by all members. While the specifics in an operating agreement may vary, signing and dating the operating agreement during the initial formation of the LLC is what makes it legally binding. It must be signed early to ensure there are no gaps in time the business is operating that are unaccounted for.
Some LLCs chose to have their operating agreement notarized. While not required, it could be a beneficial addition for LLCs with multiple members/managers.
In determining what should be covered in your LLC’s operating agreement, remember the purpose of an operating agreement so you can include everything needed to define the governance and operational framework, protect the interests of the members, and ensure that the company functions as smoothly as possible.
Operating agreements will vary based on the membership and management structure of the business. A single member operating agreement for a small business looks very different from an operating agreement for an LLC with 10 members, and a separate manager handling day-to-day operating. And they should look different!
Here are some aspects to consider including in your operating agreement:
Because there is no legal requirement to have an operating agreement, there is not a legal requirement for how to obtain an operating agreement.
The most common methods for procuring an operating agreement are:
Every client that hires us to form their Washington LLC, receives a no-cost operating agreement and internal document packet uploaded to their secure online account the same day we receive and upload their approved Washington Articles of Organization. The courtesy internal documents packet includes initial resolutions, an attorney-drafted operating agreement template, a bank resolution, and LLC membership certificates.
Our operating agreement template .pdfs vary to match the structure of your business. So based on the information you provide when you place your order for your Washington LLC, we’ll create one of the following for your business:
Before sending you the template for your LLC structure, we include your basic company details like the company’s and members’ names, the formation date, and addresses. The operation specifics like responsibilities, capital, and ownership percentages are left blank for your members to complete. The information can be added into the .pdf before or after printing, once the details are included, your members/managers should all sign and date all completed copies, and then safely store them internally.
