Key Takeaways

  • LLC bylaws, more commonly called an operating agreement, outline how an LLC will be run, including management, member rights, voting procedures, and dispute resolution.
  • They are not legally required in all states but are strongly recommended to prevent conflicts and ensure clarity.
  • LLC bylaws should detail governance rules, ownership percentages, profit/loss distribution, meeting requirements, and procedures for adding or removing members.
  • Comprehensive bylaws can also cover fiduciary duties, amendment processes, indemnification clauses, and succession planning.
  • Clear, well-structured bylaws help maintain legal protections and smooth business operations.

LLC bylaws example refers to the internal laws which govern the running of a limited liability company. The bylaws are usually referred to as the operating agreement, the purpose of which is to establish the responsibilities and rights of the LLC members and set out the LLC’s internal structure and management. This includes when meetings will be held, how decisions will be made, and how new members can be admitted.

What is an LLC Operating Agreement?

Operating agreements function to ensure the smooth running of a company in the face of unexpected challenges. They are not as important for single-member LLCs, since decision making will be in the hands of one person, but in multi-member LLCs where disputes can arise between members, they are highly recommended, since they can forestall disputes before they get started.

Additionally, an operating agreement lets LLC members set out operating rules which best serve their purposes. If an operating agreement is not specified, the company will have to refer to the default rules of the state if a disagreement comes to head, and these rules may not be in the best interest of the company or its members.

Nonetheless, despite the importance of the above and other operating agreement features, having one is not required by law.

Why LLC Bylaws Are Important Even If Not Required

While many states do not mandate LLC bylaws (operating agreements), having one provides a critical framework for running your business. Without bylaws, state default rules will apply, which may not suit your company’s needs. Well-drafted bylaws can:

  • Clarify member and manager responsibilities.
  • Define how profits, losses, and distributions are handled.
  • Establish rules for decision-making and voting thresholds.
  • Reduce the risk of member disputes by providing clear procedures.
  • Reinforce the LLC’s limited liability status by demonstrating formal governance.

For multi-member LLCs, bylaws act as a preventative tool, reducing uncertainty in areas such as ownership transfers, succession, or member withdrawal. Even for single-member LLCs, having written bylaws can strengthen legal protections and credibility with banks, investors, and courts.

What is Included in an LLC Operating Agreement?

An operating agreement should record a great deal of information about the LLC, including:

  • The LLC’s name and address.
  • The LLC’s management type (manager managed or member managed).
  • The certificate of formation (also called articles of organization).
  • Registered agent and registered office information.
  • What the ownership percentage will be.
  • What the LLC’s term of duration will be.
  • What the member’s voting rights will be.
  • What occurs if a member dies.
  • What the LLC’s business purpose is.
  • What the initial contribution should be.
  • What powers the members and/or manager will have.
  • What the management fees will be.
  • How losses and profits will be distributed.
  • How the company will be run.
  • How new members can be added.
  • How records will be maintained.
  • How finances and accounting will be handled.
  • How disputes amongst members will be resolved.
  • When regular meetings will be held.
  • Who can sign contracts for the LLC.
  • If a member can leave the LLC, or if such a member can compete against the LLC afterwards.

Additional Clauses to Consider in LLC Bylaws

Beyond the core elements, LLC bylaws can be enhanced with additional clauses to address complex scenarios:

  1. Capital Contributions & Future Funding – Rules for initial and future member contributions, and consequences of failing to meet funding obligations.
  2. Ownership Transfers – Restrictions on selling or transferring ownership interests, including rights of first refusal for existing members.
  3. Fiduciary Duties – Clear statements of member or manager duties to act in good faith and in the company’s best interest.
  4. Succession Planning – Procedures in case of a member’s death, disability, or bankruptcy.
  5. Indemnification – Protection for managers or members from certain liabilities incurred while performing their duties.
  6. Amendment Procedures – Requirements for changing bylaws, such as supermajority approval.
  7. Dispute Resolution – Steps for mediation or arbitration before resorting to litigation.

By including these provisions, LLC bylaws can evolve into a robust legal tool that adapts to growth and changing circumstances.

Sample LLC Bylaws

As well as including certain essential details, an operating agreement also must lay them out in certain specific ways through a variety of clauses. The language of such clauses might run thus, for example:

  • LLC Name: “The name of the LLC is...”
  • Registered office address: “The address of the registered office is...”
  • Members’ names and addresses: “The name and address of each member is...”
  • LLC term of duration: "The company shall continue until ..." or "... in perpetuity."
  • LLC purpose: “The purpose of the LLC shall be...”

In addition to this language, some subjects dealt with in the operating agreement might be dealt with in the following ways:

  • Registered agent address. When referring to the location of the registered agent, instead of listing the address of the registered office, LLC bylaws may list the address of the registered agent, if they should become incorporated as a foreign LLC in a state in which they don’t have an office.
  • Management. An operating agreement should set out how the members will run the company. The clauses pertaining to this should either assign roles to each member individually or indicate that the members propose to bring in professional managers for a manager-managed operation.
  • Organizational structure. These clauses should indicate where and when meetings should take place, how the meetings shall be called, what will constitute a majority in the meetings, what the rules for meetings shall be, and how the meetings will be recorded.
  • Finances. Since an LLC’s purpose is to make money and distribute it, clauses should detail how profits and losses will be distributed amongst members and what part of the LLC’s cash flow will be reinvested in the company.

Detailed Example of LLC Bylaw Provisions

A well-structured set of LLC bylaws may include the following sample provisions:

  • Article I – Formation: States the LLC name, principal office location, and formation date.
  • Article II – Purpose: Describes the nature of the business and its scope.
  • Article III – Members: Lists each member’s name, address, and ownership percentage.
  • Article IV – Management Structure: Specifies whether the LLC is member-managed or manager-managed, and outlines each role’s authority.
  • Article V – Meetings: Details meeting frequency, quorum requirements, and voting thresholds (e.g., simple majority or supermajority).
  • Article VI – Capital Contributions: Outlines each member’s contributions and terms for future funding.
  • Article VII – Profits, Losses, and Distributions: Defines allocation methods and distribution timelines.
  • Article VIII – Transfer of Interests: Sets rules for voluntary and involuntary transfers.
  • Article IX – Dissolution: Describes conditions for dissolving the LLC and distributing remaining assets.
  • Article X – Amendments: Lays out how bylaws can be changed.

These examples can be adapted to fit your specific state laws and business model. Consulting with a qualified attorney ensures that your LLC bylaws comply with applicable regulations and effectively protect all members’ interests.

Frequently Asked Questions

  1. Are LLC bylaws legally required?
    Not in most states, but they are highly recommended to set clear operational rules and protect members’ interests.
  2. How are LLC bylaws different from articles of organization?
    Articles of organization are filed with the state to form the LLC, while bylaws (operating agreement) are internal rules governing its operations.
  3. Can I change my LLC bylaws later?
    Yes. Most bylaws include amendment procedures, typically requiring a majority or supermajority member vote.
  4. Do single-member LLCs need bylaws?
    Yes, it helps maintain liability protection and credibility, even if there are no other members to govern.
  5. Should an attorney draft my LLC bylaws?
    Yes, professional drafting ensures compliance with state laws and that all necessary provisions are addressed.

If you need help understanding more in regards to llc bylaws, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.