Key Takeaways

  • Operating agreements are typically free to create if self-drafted but may cost between $100–$1,000+ when prepared by a lawyer.
  • Costs vary depending on whether you use an online service, hire an attorney, or draft it yourself.
  • Some states require an operating agreement for multi-member LLCs even if it’s not filed with the state.
  • Professional legal review can prevent costly disputes and ensure the agreement complies with state-specific laws.
  • Legal complexity, number of members, and need for custom provisions influence the final cost.

Operating agreements cost nothing because they are not a required business formation document in most states, and it doesn't require a filing fee.

What Is an Operating Agreement?

Operating agreements are written contracts which are created and signed by the members of a limited liability company (LLC). The members of an LLC are its owners. Once all of the members sign the operating agreement, they are bound to its terms.

As a legal document, an operating agreement can be used in court to hold members to its stipulations regarding things like ownership percentages or duties of certain members.

The members of an LLC can benefit from forming an operating agreement early in the life of their company because it gives them an opportunity to make sure everyone agrees on the vision for the company and its operations. Financial relationships and responsibilities can be clearly outlined. Important topics like dissolution, member departure, and more can be covered in this document.

Operating agreements for LLCs are similar to bylaws for corporations, but neither are actual filing requirements with the state.

By signing the agreement, the members of an LLC uphold it as a governing document over the business.

How Much Does an Operating Agreement Cost?

While there's no state filing fee for operating agreements, the operating agreement cost can vary widely based on how it’s created:

  • DIY Approach: If you draft the agreement yourself using a free template or based on your knowledge, the cost is typically $0. However, this may not cover state-specific nuances or potential legal issues.
  • Online Legal Services: Using platforms like Bizee or LegalZoom, the cost ranges from $40 to $100 depending on the features offered, such as customization, storage, or legal templates.
  • Hiring an Attorney: For a custom-drafted agreement that considers your specific business structure and state law, expect to pay $200 to $1,000 or more. Complex agreements with multiple members or unique profit-sharing arrangements may cost even more.

These costs are a worthwhile investment, especially when disputes arise, or when the LLC is handling substantial assets or risks.

What Is Found in an Operating Agreement?

First, the operating agreement should begin with the formation of the LLC, detailing when it was created, by whom, and how it is structured. LLCs can choose different business structures like corporations, partnerships, or sole proprietorships.

If the company has more than one owner, then the operating agreement should specify how the ownership is divided.

The agreement should also cover the following issues:

Why Paying for a Customized Agreement May Be Worth It

Although operating agreements are not required to be filed with the state, investing in a professionally drafted document can offer key advantages:

  • Legal Clarity: An attorney ensures the agreement is enforceable and complies with your state’s laws.
  • Custom Provisions: You can include detailed clauses for dispute resolution, voting rights, buyouts, or non-compete terms.
  • Multi-Member Protections: Agreements involving multiple owners often require greater legal precision to prevent disputes over profit allocation or decision-making authority.
  • Future Flexibility: A well-drafted agreement can better accommodate growth, new members, or operational pivots without needing constant amendments.

Paying for a reviewed or customized agreement is particularly wise for LLCs with complex structures, outside investors, or intellectual property considerations.

Management Structure

LLCs can choose between two different management structures: member-managed or manager-managed. A member-managed LLC is run by its members. They each take part in its daily operations. A manager-managed LLC either appoints one of the members as the manager of the company or hires an outsider.

Whether an LLC is member or manager-managed, its operating agreement should clearly outline the responsibilities of each member. This will help to prevent miscommunications, unrealistic expectations, and future disputes.

Contributions and Ownership

When someone becomes a member of an LLC, they typically make some kind of material contribution in the form of money, services, or property. This is called their capital or initial contribution.

Corporations require the ownership percentage for each shareholder to correlate with their capital contribution. LLCs have more freedom than corporations in this department. The members of an LLC can choose to give a larger ownership percentage to one person who contributed less than another if they consider them more deserving.

For instance, two members may give a capital contribution of $5,000, but one of those members takes on managerial duties that the other doesn't. The members may decide to award a larger ownership percentage to the member with more duties than the other even though they contributed the same amount initially.

Ownership percentages also affect voting power. Members with more ownership in the LLC have more voting power. This makes the ownership division among members a very important issue. It's good to keep in mind that major decisions regarding the direction and future of the company can be swayed by members who's votes hold a lot of power.

The operating agreement should also outline the voting process and what kinds of decisions required majority votes or supermajority votes and so on.

Profit Distribution

The distribution of shares should also be covered in an LLC's operating agreement. Usually, shares correspond to the ownership percentages of the members, but this can be changed in the agreement if the members so choose.

If the members want to change the shares to not match the ownership percentages, they'll need to opt for special allocations and follow the appropriate rules.

Operating agreements should also detail when and how profits will be distributed to members. Some LLCs choose to allow members to withdraw their shares from the company profits at will. This is usually only allowed when an LLC has a small number of members.

The best operating agreements are detailed and thorough. The more situations that the agreement specifies, the more prepared for disputes they will be.

Hidden Costs to Consider

When estimating your total operating agreement cost, consider the following potential add-on expenses:

  • Legal Revisions: You may incur additional fees if your business structure changes and the agreement needs to be updated.
  • State-Specific Requirements: Some states, like California and New York, have specific rules about operating agreements for multi-member LLCs—even if they don’t need to be filed.
  • Notarization or Witness Fees: While not always required, some businesses choose to notarize the agreement for added legal assurance.
  • Compliance Support: You may need additional legal consultation to ensure the agreement aligns with your Articles of Organization, especially for tax purposes.

Frequently Asked Questions

  1. Is an operating agreement required in every state?
    No, most states don’t legally require LLCs to file an operating agreement, but some states mandate having one for multi-member LLCs.
  2. Can I write my own operating agreement?
    Yes. You can draft your own using free templates, but this may miss important legal details. Professional review is recommended for customized needs.
  3. What is the cheapest way to get an operating agreement?
    The cheapest method is a DIY template, which can be free. However, low-cost templates may not address all legal requirements or complexities.
  4. How much does an attorney charge for an operating agreement?
    Attorney fees range from $200 to $1,000+, depending on the complexity, location, and number of members in the LLC.
  5. Does an operating agreement need to be notarized?
    Notarization is not typically required by law but can help strengthen the document’s enforceability.

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