Filing cabinet full of agreements for a businessLet's delve into a business law topic that tends to bubble up quite a bit in my line of work and has led to many misconceptions. I'm referring to the notion of establishing a Limited Liability Company, or an LLC. Commonly, it's believed that one must file an operating agreement with the state while initializing an LLC. This is a typical belief that countless entrepreneurs and even some legal professionals adhere to. However, this is not universally accurate. I've seen this misconception cause unnecessary confusion and stress for budding business owners, and I'm here to set the record straight.

In my practice, I've discovered that the LLC operating agreement is often misunderstood. Many believe it to be a document that absolutely must be filed with the state in all instances. This is not always true. While it is indeed a pivotal document, crucial to outlining how your business will operate, the requirement for its submission is not a blanket rule. In fact, the necessity to submit such an agreement is contingent upon the specific regulations of the state in which you're forming your LLC. 

To many of you about to embark or already on your LLC journey, this revelation may come as a surprise. It's crucial to dissect these somewhat complex components of business law to ensure a smooth and informed start to your entrepreneurial journey. It's about doing your due diligence, acquainting yourself with the right information, and not taking every piece of advice at face value.

Does the Operating Agreement Need to Be Filed?

Your first stop to answer this question is to check with an attorney who is licensed in the state where you have formed your LLC. They should be able to provide you with the guidance and information you need. However, as a general rule, an LLC Operating Agreement does not need to be filed with the state because,

  1. It's an Internal Document: Your LLC operating agreement is an internal document that outlines the management structure, ownership, and operating procedures of your business. It serves as a roadmap for how your LLC will operate and govern itself.

  2. State Requirements Vary: While some states may require you to have an operating agreement, they typically don't mandate filing it with state authorities. Instead, you should keep it on record and make it available for review if necessary.

  3. You Must Maintain Confidentiality: Filing your operating agreement with the state may expose sensitive business details to the public. By keeping it private, you can protect your company's confidential information.

  4. Businesses Need Flexibility: Not filing the operating agreement allows for greater flexibility. You can amend it as needed without the hassle of official filings.

  5. Exceptions: It's worth noting that five states—California, Delaware, Missouri, New York, and Maine—require an LLC to have an operating agreement. However, this is not the norm for most states where you can set up and run an LLC without a formal agreement, but you are running a variety of risks by not having one.

While having an LLC operating agreement is essential, you typically don't need to file it with the state. It's an internal document meant to guide your LLC's operations and maintain privacy. Always check your state's specific requirements to ensure compliance.

Do I Need a Business Attorney?

Now is a good time to get up to date on your LLC requirements, so if you'd like to discuss them further, let's schedule a Legal Strategy Session online or by calling my Edina, Minnesota office at (612) 294-6982 or my New York City office at (646) 847-3560. My office will be happy to find a convenient time for us to have a phone call to review the best options and next steps for you and your business.

Andrew Ayers
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I work with business and estate planning clients to craft legal solutions to protect their legacies.
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