LLC Operating Agreement: The 8 Clauses That Actually Matter
Templates pass the state filing requirement. They don't protect you when partners disagree.
An LLC operating agreement is the internal rulebook for the company. State law fills gaps when the agreement is silent — and state defaults are rarely what owners actually want.
Step-by-step
- 1
Capital contributions
Who put in what, on what schedule, and what happens if a member can't fund a capital call.
- 2
Profit and loss allocations
Pro-rata, special allocations, preferred returns — explicit math beats good faith.
- 3
Distributions
When cash gets distributed, who decides, and tax-distribution guarantees.
- 4
Management and voting
Member-managed vs manager-managed; supermajority items vs day-to-day decisions.
- 5
Transfer restrictions and ROFR
What happens if a member wants out, dies, or gets divorced.
- 6
Buy-sell trigger events
Death, disability, bankruptcy, termination for cause — and the valuation formula.
- 7
Non-compete and confidentiality
Reasonable in scope and time; tied to ownership and employment.
- 8
Dispute resolution
Mediation, then arbitration in a named venue. Avoid open-ended litigation clauses.
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