New York LLC Operating Agreement
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LLC Operating Agreement: What Is It?
A New York LLC operating agreement is an internal document that lays out the governing rules for managing your LLC and establishes LLC ownership. Your operating agreement explains your LLC’s rules and regulations, including when you hold member meetings, how to transfer membership interest, and how to resolve disputes.
New York is one of the few US states that requires all LLCs to adopt an operating agreement. However, you don’t need to submit your operating agreement to the Department of State. NY state law states that you must adopt your operating agreement within 90 days of filing your Articles of Organization. You can adopt your operating agreement before or after filing.
Here’s what you’ll find on this page:
FREE New York Operating Agreement Template
Why an Operating Agreement Is Important
What to Include in Your Operating Agreement
New York LLC Operating Agreement FAQs
FREE New York Operating Agreement Template
Get a head start on your New York LLC operating agreement with our FREE template, written by our legal team. This template is for single-member LLCs. (Have a multi-member LLC? We provide an operating agreement tailored to your specific business structure when you hire us as your registered agent.)
Not ready to pump out your entire operating agreement in a single sitting? Simply save your progress and come back later. When you’re finished, you can download and print out your operating agreement.
Why an Operating Agreement Is Important
Of course, having an operating agreement for your New York LLC is important because it’s a legal requirement (NY LLC L § 417). But how else does creating a strong operating agreement benefit your LLC?
Keep your business operating with ease
Because an operating agreement explains the management structure of your LLC, this document can provide your business with clarity and direction. For example, your operating should contain information on the duties of members and managers, your meeting schedule, and what to do if you add or lose a member.
Having organizational policies in place allows you to concentrate on more important aspects of running your business rather than waste time figuring out who’s responsible for answering customer emails or who’s allowed to access the bank account.
Resolve disputes quickly
While you’d probably like to imagine that running your LLC will always be smooth sailing, you must be prepared to meet the storm if one arises. A strong operating agreement should contain provisions on what do when there is a dispute between members or if a member has a conflict of interest. For example, who can call meeting in times of conflict? How much voting power does each member have? Will you call upon a third party to mediate?
It’s also important to make sure that your operating agreement clearly identifies member ownership percentages and how your LLC’s profits are distributed so that any member trying to claim more than what’s legally theirs isn’t able to do so.
Protect your rights in court
Your operating agreement is a key asset if you ever end up in court. An operating agreement proves members’ ownership of the LLC and can help you maintain your limited liability status.
Including financial information your operating agreement (bank account, company assets, bookkeeping procedures) can help show that there hasn’t been any commingling of personal and business funds (known as “piercing the corporate veil”).
Additionally, making sure your operating agreement lists the duties and rights of members along with ownership percentages can help protect all members in a situation where one member sues the LLC or other members.
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What to Include in Your Operating Agreement
There aren’t any requirements for what an operating agreement must include. However, the majority of operating agreements contain a common set of provisions that cover the LLC’s organizational and financial structure and policies.
Many companies have their operating agreement reviewed by a lawyer to make sure it meets all legal standards.
You can include any provisions you’d like in your operating agreement, aside from items or clauses aimed at subverting state laws regarding LLCs. For example, you can’t write a provision into your operating agreement that says your LLC doesn’t have to designate a registered agent when designating a registered agent is required by law.
Generally, here’s what an operating agreement includes:
This includes:
- Company name and address
- Name and address of your New York registered agent
- Your jurisdiction of formation
- Your company purpose
You should provide the following:
- Member names and addresses
- The contribution(s) each member made to become an ownership. This is typically a dollar amount, but it can also be labor, time, or intellectual property
- How these contributions convert into ownership interest (especially important to protect the rights of those who made non-monetary contributions)
First, you’ll need to identify whether your LLC is member-managed or manager-managed. In other words, will your owners manage your LLC (member-managed) or will you hire others to manage it for you (member-managed)?
Here’s what you’ll need to list out:
- Member/manager duties and rights (Who’s responsible for doing what?)
- Member/manager meetings schedule and rules (Who has voting rights? And how are votes weighted?)
- Member/manager compensation (How is everyone paid for their hard work?)
Additionally, it’s a good idea to have a plan for leadership transitions. What is the process for adding or removing a member or replacing a manager?
This section can include information about your company bank accounts, loans, bookkeeping procedures, and even your tax classification. You can also list your LLC’s other assets, such as property, vehicles, or ownership interest in other companies.
Even amazing teams can have disagreements. That’s why you need procedures in place for solving disagreements and disputes. What do you do when one member claims they’re owed more compensation than other members? Or how will you move forward if half of your members decide to jump ship and want to take the company’s flagship product with them?
While it’s true that your operating agreement is legally binding, it’s also legally OK to update or change your bylaws if you follow the proper amendment procedures. When you write your operating agreement, don’t forget to include the rules for making amendments. Who can propose an amendment? How many votes are needed to pass an amendment?
It might be hard to imagine dissolving your LLC or merging with another company right now, but you never know what’s in store, and dissolution or merger is often complicated. You can write provisions that identify events that would trigger dissolution, such as bankruptcy or losing good standing with the state. You can even specify a date that your LLC will dissolve if you form your company for a specific time period or event.
What’s most important when writing rules for dissolution and merger is how your assets will be liquidated, transferred, or distributed so that there’s no confusion about where the money goes.
New York LLC Operating Agreement FAQs
Yes. New York is one of the few states where LLCs are legally required to have an operating agreement. Your operating agreement must be adopted within 90 days of filing your Articles of Organization with the Department of State.
A lawyer or legal professional can write an operating agreement for you. A member of your LLC who is familiar with operating agreements can also draft your operating agreement from scratch or using a template (like the free, attorney-drafted bylaws offered by NY Registered Agent).
Yes. You can write your own operating agreement using your own knowledge or a template. It’s a good idea to have your operating agreement reviewed by a lawyer, whatever you do.
Yes. Your operating agreement must list the names and addresses of all LLC members. However, since this is an internal document, this information is not public.
Yes. You operating agreement is legally binding, just like a contract.
To ensure that the operating agreement is legally binding, all members should sign the operating agreement.
Yes. All LLCs, including single-member LLCs, are legally required to adopt an operating agreement. Additionally, having an operating agreement as a single-member LLCs can help you prove ownership of your LLC and maintain limited liability status if you ever end up in court. It’s possible that you may be asked to show a copy of your operating agreement when banking or even leasing property in the name of your LLC.
Yes. You can amend your operating agreement as much as necessary. When writing your operating agreement, make sure you include provisions for making amendments so that you have a clear procedure to follow during the amendment process.
Hopefully, losing your operating agreement isn’t likely. NY state statue NY LLC L § 1102 requires that your LLC keep a copy of your operating agreement as part of your records. However, it is possible for your operating agreement to be lost or even destroyed in case of a disaster. One way to prevent this from happening to keep a copy of your operating agreement with your lawyer or in a safety deposit box.
If you do lose your operating agreement, you’ll want to replace it as soon as you can. Meet with your fellow members and have everyone bring any evidence they have of their initial contribution to the company and ownership interest. Draft your new operating agreement using all the information you have available, enlisting an attorney if necessary.
