Maryland LLC Operating Agreement

What is an LLC Operating Agreement?

An LLC Operating Agreement is the internal contract of a limited liability company. It sets out who owns the company, how it is managed, how profits are shared, and what happens when a member leaves or the company closes.

Even single-member LLCs benefit from one: it separates you from the business, which supports your liability protection, and banks, lenders, and investors routinely ask to see it.

When do you need one?

You should put an Operating Agreement in place as soon as your LLC is formed, and update it when the business changes. Common moments include:

• Forming a new LLC, whether single-member or with partners
• Opening a business bank account or applying for financing
• Bringing in a new member or investor
• Changing how the company is managed or how profits are split
• Preparing for a member's exit, retirement, or buyout

Types of Operating Agreements

The right structure depends on how many members your LLC has and who runs the day-to-day business. We tailor the document to your setup, including:

• Single-member: one owner, documents the separation between you and the company
• Multi-member: two or more owners, covers voting, profit splits, and member exits
• Member-managed: the owners run the business directly
• Manager-managed: one or more appointed managers run the business for the members

What to include

A complete Operating Agreement answers the questions that cause disputes later. Make sure yours covers:

• The company name, formation state, and business purpose
• Each member's name, ownership percentage, and capital contribution
• Whether the LLC is member-managed or manager-managed
• How profits, losses, and distributions are allocated
• Voting rights and how major decisions are approved
• What happens when a member wants to leave, sell, or passes away
• How the agreement can be amended and how the LLC is dissolved

State rules for LLCs

LLC law is state law. A few states, including California, New York, and Missouri, require LLCs to have an Operating Agreement, and every state applies its own default rules to companies that don't have one.

Those defaults may not match what you and your co-owners actually want. Tell us where your LLC is formed and we tailor the agreement to that state, so its rules work for you instead of against you.

Common mistakes to avoid

• Skipping the agreement entirely because your state doesn't require one
• Leaving ownership percentages or contributions undocumented
• Not deciding how a member's exit or buyout will be handled
• Copying a generic template that contradicts your state's LLC act
• Never updating the agreement after members or management change