# The Importance of an LLC Operating Agreement: A Beginner’s Guide
Do you need an operating agreement when you form a limited liability company (LLC)? As a quick refresher, operating agreements are legal documents that ensure the LLC is conducted in a proper manner and protects the personal liability of the business. Most states do not require LLCs to have this document, so many LLCs choose not to draft one.
While it may not be a requirement to have an operating agreement, it’s actually in the best interest of an LLC to draft one. And by drafting it, I’m referring to creating a [written operating agreement](https://blog.mycorporation.com/2014/05/goes-operating-agreement/). Some LLCs, depending on the number of members, may think an oral agreement is sufficient enough to run a business. However, a written operating agreement defines in writing how the LLC is run. It establishes the rules and structure for the LLC. Members may refer back to the document if they have questions. It’s also readily available in the event the state questions the validity of your LLC.
## What to Include in an LLC Operating Agreement
Ready to draft an operating agreement for your LLC? Here are the key areas to thoroughly cover in this document.
### Ownership of the LLC
– What percentage of the LLC is each member entitled to receive?
– The ownership portion of an operating agreement outlines how the LLC’s profits, losses, and assets are divided among its members.
– More often than not, this is contingent on the LLC structure.
### Members’ Rights and Responsibilities
– Every member in an LLC should understand their role within the company and the skills they bring to the table.
– Outline how much say each member has in a business decision and the plan to settle disputes between members.
### Joining and Leaving the LLC
– Your operating agreement must touch on protocol for what happens next if a member decides to join or leave the LLC.
– Determine details for onboarding new members and the process for members leaving the LLC.
### Dissolution of the LLC
– Detail terms for how to dissolve an LLC, including how remaining assets should be divided among members.
– Outline procedures for dissolution and what members are entitled to upon leaving the company.
### Severability Provision
Close out the LLC operating agreement with a severability provision. This provision ensures that in the event a section of the agreement is contrary to state or federal law, other aspects of the agreement remain in effect.
Finally, remember that members may edit the LLC operating agreement in the future. Include a provision that covers how modifications should be made to the document. Review the operating agreement with all members present to ensure accuracy before finalizing it for the LLC.
**RELATED:** [How Do Owners of an LLC or S Corporation Get Paid?](https://www.allbusiness.com/how-do-owners-of-llc-or-s-corporation-get-paid-124818-1.html)
By following these steps and thoroughly drafting an LLC operating agreement, you can ensure the proper management and protection of your limited liability company.
