Key Takeaways

  • LLCs typically do not have "bylaws" in the corporate sense, but instead use an operating agreement to govern internal operations.
  • An operating agreement serves a similar purpose to corporate bylaws, outlining management structure, member responsibilities, and decision-making processes.
  • While most states do not require an operating agreement, having one can prevent disputes, clarify profit distribution, and strengthen liability protection.
  • Corporate bylaws apply to corporations and detail shareholder rights, board duties, meeting procedures, and voting rules.
  • LLC operating agreements can be customized for single-member or multi-member LLCs, including provisions for admitting new members, resolving disputes, and dissolving the business.
  • State laws may provide default rules if no operating agreement exists, but these may not align with the members’ preferences.

LLC bylaws, better known as LLC operating agreements, are the internal rules and regulations for governing a limited liability company.

What Is an LLC?

  • An LLC or a limited liability company is a type of business entity that limits the liability of its owners, also known as members.
  • An LLC is treated as a separate legal entity from its owners.
  • Members are not personally responsible for debts and obligations of the company.
  • For forming an LLC, you must file formation documents with the state, along with requisite filing fees.
  • Members of an LLC can either appoint a manager or choose to manage the company themselves.

Who Is Considered a Member of an LLC?

  • An individual or a corporation that holds ownership in the LLC is called its member.
  • An LLC member must have contributed to the capital of the company.
  • The contribution could be in the form of money, property, or services.
  • In return for his contribution, a member gets a stake in the ownership of the company.

Do LLCs Have Stock and Shares Like Corporations?

  • Unlike corporations, LLCs do not issue shares and stock to their owners.
  • LLCs assign a percentage of ownership to members based upon their capital contribution.
  • Regardless of the number of members, ownership percentages of all the members put together must add up to 100.

Corporate Bylaws                                                     

  • Bylaws are the rules that govern the internal affairs of a corporation.
  • Different states have different requirements regarding the items you must include in the bylaws.

Among others, corporate bylaws usually include the following details:

  • Organization structure
  • Duties and responsibilities of members
  • Names and details of directors
  • Requirements and procedure for holding meetings of shareholders and directors
  • List of committees

LLC Bylaws

  • LLC Operating Agreement contains rules and regulations for governing the internal affairs of the company.
  • These rules are similar to corporate bylaws but in the case of an LLC, they are not referred to as “bylaws” as such.

Do LLCs Have Bylaws or Just Operating Agreements?

Unlike corporations, which are legally required to adopt bylaws, LLCs generally do not have "bylaws" in the traditional sense. Instead, they use an LLC operating agreement, which serves a comparable purpose. This agreement outlines the internal rules for managing the company, member roles, voting rights, and procedures for handling changes in ownership.

In some states, operating agreements are mandatory for LLC formation; in others, they are optional but strongly recommended. Without an operating agreement, the LLC will be governed by the state’s default LLC laws, which may not reflect the members’ preferred structure or management style.

Having a written operating agreement is especially beneficial for:

  • Clarifying roles between members and managers.
  • Preventing disputes over decision-making and profit distribution.
  • Supporting liability protection by showing separation between the business and its owners.
  • Defining processes for adding members, removing members, or dissolving the LLC.

Even though the term “LLC bylaws” is sometimes used informally, the correct and legally recognized document for LLC governance is the operating agreement.

What Is an LLC Operating Agreement?

  • An LLC Operating Agreement has different names, like LLC Agreement, LLC Operations Agreement, Operating Agreement, Operating Agreement for LLC, Operating Agreement LLC, LLC Partnership Agreement, LLC Setup Agreement, and LLC Bylaws.
  • It's a legal document that sets out the duties and responsibilities of members and contains regulations for the internal management of the company.
  • It includes procedures for making decisions, holding members' meetings, and admitting new members, among others.
  • It explicitly states the terms and conditions of the agreement made between the members.

State Requirements and Consequences of Not Having One

State laws vary on whether an LLC operating agreement is legally required. For example:

  • California, New York, Missouri, and Maine require LLCs to have an operating agreement.
  • Most other states do not mandate one but strongly encourage it.

If an LLC operates without a written operating agreement, state default rules will dictate how the company is run. These default provisions may not align with the members’ intentions—for instance, profits might be split equally among members regardless of their investment, or all members may have equal management authority even if some prefer a passive ownership role.

Operating without a formal agreement can also create challenges when:

  • Opening a business bank account.
  • Seeking financing or investment.
  • Demonstrating clear separation of business and personal affairs for liability purposes.

What Does an LLC Operating Agreement Include?

Definitions Section

This is an important section that includes:

  • Definition of major terms (the terms so defined are usually capitalized in the document)
  • Definition of various abbreviations used in the document
  • Specific meaning assigned to certain terms (for example, “fiscal year” shall refer to a calendar year)

LLC Information

  • Name, nature, and details of the business
  • Length or duration of the business
  • Address of the office or place of business

Member Information

  • Name and address of members
  • Class or type of membership of each member
  • Capital contribution of each member
  • Each member's percentage in the ownership of the company
  • Each member's share in profits and losses of the company

Provisions Concerning Membership

  • Whether members can leave the company when they no longer want to continue
  • Whether former members can compete with the company
  • Distribution of assets in case of dissolution
  • Admission of new members

Management

  • Procedure for company management
  • Procedure for decision making (cases that require unanimous consent and cases where majority votes would suffice)

Fiduciary Section

  • Fiduciary duties of members, managers, and office-bearers
  • Contractual obligations
  • Conflict of interest in case of transactions involving members, managers, and their agents and affiliates.

Liability of Members

  • Declaration to the effect that members are not personally responsible for business debts and obligations of the company

Meetings

  • Procedure, frequency, and venue for holding company meetings

Administration

  • Fiscal year, method of accounting, annual report, and other administrative details

Miscellaneous Provisions

  • Provisions for sending and receiving notices
  • Declaration to the effect that the company is governed by the laws of the state named in the document
  • Signing contracts on behalf of the LLC
  • Procedure for resolving disputes

Why Should an LLC Have an Operating Agreement?

  • Fewer discrepancies in the conduct of business
  • Lowers risk of misunderstanding regarding the distribution of profits and losses

Special Considerations for Single-Member vs. Multi-Member LLCs

Operating agreements should be tailored to the LLC’s ownership structure.

Single-Member LLCs

  • Establish the LLC as a separate legal entity, reinforcing liability protection.
  • Detail the member’s authority to make decisions and sign contracts.
  • Provide succession instructions in case of the owner’s incapacity or death.

Multi-Member LLCs

  • Outline each member’s voting rights, profit distribution, and capital contribution.
  • Define management roles—whether member-managed or manager-managed.
  • Set procedures for resolving disagreements and handling buyouts or transfers of interest.
  • Include protections against involuntary ownership changes, such as a member’s bankruptcy or divorce.

By customizing these provisions, LLC members can maintain control over how their business operates and adapts to future changes.

Frequently Asked Questions

  1. Do LLCs have bylaws like corporations?
    No. LLCs use an operating agreement, which serves a similar purpose by setting internal rules and management procedures.
  2. Is an LLC operating agreement legally required?
    Only in certain states such as California, New York, Missouri, and Maine. In most states, it’s optional but strongly advised.
  3. Can a single-member LLC have an operating agreement?
    Yes. Even single-member LLCs benefit from one to reinforce liability protection and establish clear operational rules.
  4. What happens if my LLC doesn’t have an operating agreement?
    State default laws will govern your LLC, which may not reflect your preferred management or profit distribution structure.
  5. Can I call my operating agreement “LLC bylaws”?
    While some use the term informally, the correct legal term for LLC governance is “operating agreement.”

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