operating agreementn.
Reviewed by Owen Hathaway, AttorneyUpdated June 18, 2026The contract among an LLC's owners setting the internal rules: who owns what, who manages, how profits split, and what happens when an owner exits.
An operating agreement is the contract among the members of a limited liability company that governs the company's internal affairs: ownership percentages, management structure, voting, capital contributions, distributions, and what happens when a member dies, withdraws, or wants out.
Even where state law does not require one, an operating agreement is the single most important LLC document. Without it, the LLC falls back on statutory default rules that may not match the owners' intent, a frequent source of costly disputes, especially in multi-member companies.
Colorado's LLC Act (C.R.S. Title 7, Article 80) supplies default rules that an operating agreement can override within statutory limits. Wyoming's LLC Act (Wyo. Stat. Title 17, Ch. 29) gives operating agreements broad effect. A single-member LLC still benefits from a written agreement to reinforce the entity's separateness.
Related terms
- limited liability companyA business structure that shields its owners' personal assets from the company's debts and lawsuits, while staying simpler and more flexible to run than a corporation.
- articles of organizationThe formation document filed with the state that legally creates an LLC. (Corporations and nonprofits file articles of incorporation instead.)
- buy-sell agreementA contract among co-owners setting what happens to an owner's share on death, disability, divorce, or departure: who can buy, at what price, and how it is paid.
- charging orderA creditor's remedy against an owner's interest in an LLC or partnership: the creditor can intercept distributions but generally can't seize the business or run it.