Do LLCs Have Bylaws or Operating Agreements?

Key Takeaways

• LLCs do not have “bylaws” like corporations do; instead, they use an operating agreement, which serves a similar purpose.
• The operating agreement defines management structure, ownership, voting rights, and profit distribution.
• While most states don’t legally require an operating agreement, having one helps prevent disputes and adds legitimacy to the business.
• Corporate bylaws and LLC operating agreements differ in structure, flexibility, and legal requirements.
• Knowing the distinction between bylaws and operating agreements helps entrepreneurs choose the right governance structure for their business.

Bylaws for an LLC are outlined in the operating agreement. This document, though not required by law, outlines what each member of the company is responsible for and how you'll proceed with certain issues, such as changing owners or dissolving the company. Learning about bylaws and creating an operating agreement for your LLC can safeguard the enterprise for years to come.

Overview: LLC Operating Agreement

Well-written bylaws are key to navigating formal business matters without conflict. For LLCs, these bylaws are known as an operating agreement.

Understanding Bylaws vs. Operating Agreements

When people ask, “do LLCs have bylaws?”, it’s important to clarify that bylaws are specific to corporations, not LLCs. A corporation’s bylaws establish the internal rules for officers, shareholders, and directors — outlining procedures for meetings, voting, and recordkeeping. In contrast, an LLC operating agreement serves as the equivalent governance document for limited liability companies, dictating how the business will operate on a daily basis.

The operating agreement acts as a roadmap for how profits and losses are shared, how membership interests can be transferred, and how disputes are resolved. This internal document also defines whether the LLC will be member-managed or manager-managed and clarifies each member’s financial and decision-making role.

Even though LLCs typically enjoy more flexibility than corporations, adopting an operating agreement is highly recommended to:

• Protect the LLC’s limited liability status
• Clarify ownership percentages and capital contributions
• Define voting and management rights
• Prevent future misunderstandings or disputes among members

This distinction is vital: corporate bylaws are governed by state corporate law, while LLC operating agreements are governed by the state’s LLC statute, giving members greater freedom to tailor the document to their specific needs.

Difference Between Articles of Organization and Operating Agreement

Your LLC's articles of organization are required when you apply for your LLC, but this document only includes basic information, such as your business address and the members' names. The operating agreement is the document that outlines how your business must manage certain aspects of the business and who is responsible for what parts of the enterprise.

The operating agreement governs your LLC — not the articles of organization. This document is incredibly important, but it isn't federally required that your LLC create an operating agreement.

The agreement includes details such as:

• Who owns the LLC
• Who manages the LLC
• How profits are distributed
• How many members must agree to an amendment to change the articles of origination
• How to proceed with any problems or changes affecting the LLC

You can create an operating agreement whether you have a single member or multimember LLC, though what you'll need to include in the contract will vary based on how your business is structured.

Why LLCs Don’t Have Bylaws

LLCs differ fundamentally from corporations in their internal management structure. Bylaws are designed for corporations that have a board of directors and officers, while LLCs operate with greater flexibility and do not have to adhere to corporate formalities. Instead of bylaws, LLCs rely on the operating agreement, which outlines similar principles — but in a way that aligns with the LLC’s less formal, member-driven nature.

In most states, bylaws are legally required for corporations to maintain compliance and define how shareholders and directors interact. By contrast, an operating agreement is optional in many states for LLCs, though it is a best practice to create one. It provides clarity and protects the LLC’s structure in the eyes of banks, investors, and the courts.

This distinction allows LLCs to avoid rigid rules around shareholder meetings or board elections, while still maintaining order through a customized agreement.

Do You Have to Draft an Operating Agreement for Your LLC?

Only a few states require that you create an operating an agreement for your LLC. In areas where this document isn't required, you won't lose LLC liability protections or be unable to start this type of business if you don't draft an operating agreement.

However, even states where this document isn't required will recommend that you create one, have all members sign it, and get it notarized. Moreover, creating an operating agreement when you form your LLC can help you with lenders, banks, potential partners and investors, and attorneys and accountants. Working with these third parties will be much easier if you can provide them with a copy of your operating agreement.

Benefits of Having an Operating Agreement

Even though not every state mandates one, an operating agreement is critical to maintaining your LLC’s credibility and protecting its limited liability. It serves multiple functions beyond compliance:

1. Proof of Ownership – It documents each member’s contribution and ownership share, which can be essential when seeking financing or onboarding new investors.
2. Operational Clarity – The agreement specifies how decisions will be made, avoiding confusion when significant business choices arise.
3. Conflict Prevention – By laying out voting procedures, profit allocations, and buyout processes, it minimizes potential disputes.
4. Legal Protection – If your LLC is sued, courts are more likely to honor limited liability protections if you have a written operating agreement that separates the business from its owners.
5. Continuity Planning – It defines what happens if a member dies, retires, or wants to sell their interest, ensuring business continuity.

In short, while LLCs do not technically have “bylaws,” a well-crafted operating agreement serves the same purpose and provides significant operational and legal benefits.

What Do You Need to Include in Your LLC?

Most LLCs include information such as the organization's structure, each member's individual responsibilities, a list of committees, who's on the board of directors, and how directors' and shareholders' meetings are structured. Note that LLCs aren't required to hold formal meetings or to create a board of directors. This is just an option for this type of business structure.

If you live in a state that requires an operating agreement for your LLC, you will likely need to include the following information about each member:

• Their percentage of ownership
• Their rights and responsibilities
• Their voting power
• Their fiduciary duties

The operating agreement should also include details about how profits and losses are distributed and how the business is to be managed. More specific information about what you need to include in your LLC is highlighted below.

• Contact Information and Principals: Provide the company's name and address as well as the names of all members. You may also provide the address of your registered agent if they're located at a different address than your LLC.
• The LLC's Term and Purpose: Record the purpose for your LLC (i.e., what product or service you provide and to whom) and whether you want the business to automatically dissolve at a certain date, dissolve after meeting certain conditions, or continue to run indefinitely.
• The Rights and Responsibilities of Members: In this section, you can assign roles to individual members and state whether you will hire workers to handle certain responsibilities (such as training new hires). You can also include how often and where the members will meet to go over the LLC's progress and standing.
• The Distribution of Profits and Losses: The operating agreement should explain how losses and profits above the growth target will be shared among members. If you want to reinvest company cash flow beyond a certain profit margin, that information should be included in the operating agreement. This will help avoid confusion about who is entitled to the company's profits and what percentage each member is owed.

Key Differences Between LLC Operating Agreements and Corporate Bylaws

Understanding how LLC operating agreements differ from corporate bylaws can help you decide the right business structure for your needs:

The flexibility of an operating agreement allows members to tailor provisions to their business goals, unlike bylaws that must adhere to statutory frameworks.

Frequently Asked Questions

1. Do LLCs have bylaws? No. LLCs use an operating agreement instead of bylaws. This document outlines ownership, management, and financial procedures.

2. Is an operating agreement legally required for an LLC? Only a few states require one, but it’s highly recommended to avoid disputes and maintain limited liability.

3. What’s the difference between bylaws and an operating agreement? Bylaws apply to corporations and govern boards and shareholders, while operating agreements apply to LLCs and define member roles and operations.

4. Can a single-member LLC have an operating agreement? Yes. Even single-member LLCs benefit from having one to prove separation between personal and business assets.

5. What happens if an LLC doesn’t have an operating agreement? State default laws will govern the LLC, which may not align with members’ intentions or protect their interests effectively.

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