Do LLCs Have Bylaws or Operating Agreements?

Key Takeaways

• LLCs don’t have traditional “bylaws” like corporations do; instead, they operate under an LLC operating agreement.
• An operating agreement defines ownership structure, management roles, voting rights, and profit distribution.
• Although most states don’t legally require LLCs to have an operating agreement, having one protects members’ limited liability status and prevents internal disputes.
• Corporate bylaws and LLC operating agreements serve similar governance purposes but apply to different business entities.
• Lenders, investors, and banks often request a copy of the operating agreement to verify authority and ownership before doing business.
• Keeping your LLC operating agreement updated ensures compliance and reflects any changes in membership or business operations.

LLC bylaws or an operating agreement are required in many states in order for businesses to function legally. These documents are for internal purposes only and aren't kept by the state, but they are helpful in solidifying the structure and management of an LCC or corporation.

State offices don't collect operating agreements or bylaws. However, these documents should still be maintained by the company and be accessible to shareholders, investors, or board members to review at any given time. Internal documents can and will be requested by a number of groups or individuals, including:

• Banks for verification when opening a business checking account.
• Lenders who are helping the corporation or LLC secure financing.
• Lawyers and accountants.
• Potential investors or business partners.

LLC Operating Agreements

Most people refer to the document as an LLC operating agreement, but it can also go by a number of other names, including:

• Limited Liability Company Operating Agreement.
• LLC Bylaws.
• LLC Setup Agreement.
• LLC Operations Agreement.

The operating agreement should be created at the same time the LLC is formed. This powerful document protects the company's legal rights and outlines the operating terms of the company. The operating agreement also ensures that all members are in agreement of the internal workings of the company.

Each state has its own rules about LLC operating agreements, but there tends to be more flexibility with these documents than there is with documents for other corporations. Other kinds of organizational structures, including S Corps, C Corps, and non-profits, have tighter rules because they are either sold as stocks or have more government control. Other types of organizations have similar documents to an LLC operating agreement; for a corporation, it is bylaws for the board of directors, while partnerships use a partnership agreement.

One of the biggest differences between an LLC operating agreement and other types of documents is that a corporation is required to have bylaws, but partnerships don't have to have a partnership agreement. Partnerships and LLCs actually function very similarly, which means that a partnership agreement and an operating agreement have a lot in common.

One of the requirements of an LLC operating agreement is that it must contain clauses to establish the name of the company, who is in charge, and where it is located. These clauses don't need to be wordy and can simply follow the formula of “The name of the LLC is …”, “The address of the registered office is …”, and so forth. If the company doesn't have an office in that state, bylaws can list the address of a registered agent instead.

What’s the Difference Between LLC Bylaws and Operating Agreements?

Many new business owners wonder: do LLCs have bylaws? The answer is no—bylaws are specific to corporations. Instead, LLCs use an operating agreement, which serves a similar purpose but is tailored to the flexible structure of a limited liability company.

Bylaws outline how a corporation’s board of directors operates, voting procedures, officer roles, and shareholder rights. They are required for most corporations once articles of incorporation are filed.Operating agreements, on the other hand, define how LLC members interact, manage profits and losses, and make business decisions. While not always legally required, most states strongly recommend them to safeguard the company’s legal and financial structure.

Key differences include:

• Entity Type: Bylaws are for corporations; operating agreements are for LLCs.
• Management: Corporations have directors and officers, while LLCs are member- or manager-managed.
• Ownership: Corporate shares vs. LLC membership interests.
• Filing: Bylaws are internal but required for corporations; operating agreements are internal and typically optional for LLCs.

Having an operating agreement provides proof that the LLC is operating as a separate legal entity — helping preserve liability protection in the event of disputes or lawsuits.

Why LLC Operating Agreements Are Essential

Even though many states do not require an LLC to have an operating agreement, creating one offers major benefits. It provides:

• Clarity in management and voting rights: It defines who manages daily operations and how votes are weighted.
• Financial transparency: It explains how profits and losses are divided among members.
• Dispute prevention: Clear procedures for resolving disagreements or handling member departures.
• Protection of limited liability: Without a written agreement, courts may treat an LLC like a sole proprietorship or partnership, exposing owners to personal liability.
• Continuity: It sets out what happens if a member withdraws or dies, ensuring the business can continue operating smoothly.

In states like California, Delaware, and New York, courts often view an operating agreement as the primary evidence of the LLC’s governance structure

Additional Items to Include

Before creating the operating agreement, LLC members must determine if the company will exist for only a set period of time or if it will last for the foreseeable future and include procedures to dissolve the company at a certain time. These clauses should state how long the company will continue and include a specific date or say that the company will continue in perpetuity.

Another important clause in the operating agreement dictates who will manage the LLC if any of the listed members are no longer able to. Without this clause, the company could face a legal dispute over who is in charge.

Other clauses should indicate the process members would need to take to dissolve the company, such as by a vote of members with a majority share of the LLC. There should also be a clause that clearly states the purpose of the company.

Another clause should state the process the owner needs to follow to get funds distributed from the company. Including this clause ensures that the owner keeps the right records and follows the correct procedure to take out money without negative consequences.

Without a firm operating agreement and set procedures, business owners run the risk of not separating their business and personal accounts, which can lead to complications with taxes. Owners who don't have operating agreements could face obstacles when they try to show that the business is an independent entity from their personal accounts. Not being able to define the business as separate from the owner could lead to liability problems.

What to Include in an LLC Operating Agreement

When drafting an operating agreement, include detailed provisions to make it legally strong and practical. Key sections often cover:

1. Business Details – Legal name, principal address, and purpose of the LLC.
2. Ownership Information – List of members, ownership percentages, and initial capital contributions.
3. Management Structure – Whether the LLC is member-managed or manager-managed, with defined roles and decision-making powers.
4. Voting Procedures – How votes are allocated and conducted (e.g., one vote per member or based on ownership percentage).
5. Profit and Loss Allocation – Rules for distributing profits, covering losses, and reinvestment policies.
6. Meeting Rules – Frequency of meetings, quorum requirements, and notice procedures.
7. Membership Changes – Procedures for adding or removing members and transferring interests.
8. Dissolution Clause – The process for winding up the business and distributing assets.
9. Amendments – Steps for making future changes to the agreement.

These provisions prevent confusion, help the LLC comply with state requirements, and demonstrate the entity’s legitimacy to banks, lenders, and government agencies.

How to Maintain and Update Your Operating Agreement

Once your operating agreement is in place, it should not remain static. Review and update it regularly to reflect major changes such as:

• Admitting or removing members
• Changes in ownership percentages
• Shifts from member-managed to manager-managed structure
• New voting or profit-sharing arrangements
• Relocation of the principal place of business

Each amendment should be approved according to the procedures outlined in the current operating agreement and documented with signatures. Maintaining updated records strengthens the LLC’s credibility and compliance posture.

Frequently Asked Questions

1. Do LLCs have bylaws like corporations?

No. LLCs use an operating agreement instead of bylaws. Bylaws are for corporations and define board and shareholder procedures.

2. Is an operating agreement required by law?

Not always. Some states mandate it (e.g., California, New York), but even where it’s optional, it’s highly recommended for liability protection.

3. What happens if my LLC doesn’t have an operating agreement?

Without one, state default laws govern your business. This can lead to unclear management rights, uneven profit sharing, or disputes among members.

4. Can a single-member LLC have an operating agreement?

Yes. Even single-member LLCs should have one—it proves separation between personal and business assets and can be crucial for legal or tax purposes.

5. Do I need to file my operating agreement with the state?

No. The operating agreement is an internal document, but you should keep a signed copy with your business records and provide it to banks or investors if requested.

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