Definition:
An operating agreement is a document that describes the operations of a limited liability company (LLC), setting forth the agreements between the members of the LLC. An operating agreement can be compared to the by-laws of a corporation.
An operating agreement typically contains the following provisions
- How the LLC has been formed
- A listing of the members, along with their investment interests, percentage interests, voting rights, and distribution of profits and losses
- How the LLC is to be managed
- The rights and duties of each member
- Discussion of dissolution or termination of the LLC, and what happens to a member's share when he/she leaves
