LLC Membership Agreement Template

In plain language: Identifies all members by full legal name, records the LLC's formation state and date, and states the registered agent and principal place of business.

Common mistake: Using a member's nickname or trade name instead of their legal name. Enforcement and tax reporting both require names that match government-issued ID and IRS records.

In plain language: States each member's ownership percentage or unit count and the amount, type, and deadline for their initial capital contribution.

Common mistake: Failing to specify the form and deadline for contributions. An undocumented service contribution has no agreed value and can create IRS taxable-income disputes for both the member and the LLC.

In plain language: Defines how the LLC's annual net income and net loss are split among members — typically pro rata to membership interest, but can include special allocations.

Common mistake: Using allocations that differ from distribution percentages without a qualified tax professional reviewing the structure. Mismatched allocations trigger IRS scrutiny under the substantial economic effect rules.

In plain language: Sets the timing, frequency, and discretion rules for distributing cash or property to members — including whether tax distributions are mandatory.

Common mistake: Omitting a mandatory tax distribution clause. Pass-through entities allocate taxable income to members whether or not cash is distributed; members can face tax bills with no corresponding cash payout.

In plain language: Specifies whether the LLC is member-managed or manager-managed, identifies the initial manager(s) if applicable, and sets voting thresholds for routine and major decisions.

Common mistake: Not listing specific major decisions requiring a supermajority. Without this list, any member can argue that selling company assets or taking on significant debt needs only a simple majority vote.

In plain language: Prohibits members from transferring their interest without consent and gives existing members the right to purchase a transferring member's interest before it goes to a third party.

Common mistake: Including a blanket transfer prohibition with no exception for transfers to a member's wholly-owned trust or family holding entity. This forces unnecessary consent rounds for routine estate-planning moves.

In plain language: Defines whether voluntary withdrawal is permitted, the notice required, and how the departing member's interest is valued and purchased.

Common mistake: No valuation methodology for the buyout price. When members disagree on value and there is no agreed formula or appraisal process, exit disputes routinely end in litigation.

In plain language: Establishes a procedure for breaking gridlock when members holding equal votes cannot reach a decision — including mediation, buy-sell triggers, or designated tiebreaker authority.

Common mistake: Leaving deadlock resolution out of a 50/50 LLC entirely. Equal-split LLCs with no deadlock clause are the single most common source of LLC litigation and court-ordered dissolution.

In plain language: Lists the events that trigger dissolution, the order in which assets are distributed (creditors first, then members pro rata), and who manages the wind-up process.

Common mistake: Not specifying the wind-up manager. When no one is designated, each member may act unilaterally, creating conflicting obligations to creditors and delaying the closing of the LLC's affairs.

In plain language: States which state's LLC statutes govern the agreement and whether disputes are resolved by arbitration, mediation, or litigation in a specified forum.

Common mistake: Choosing a governing state with no connection to where the LLC operates or its members reside. Courts in the operating state may apply local LLC statutes regardless of the governing-law clause.

An LLC membership agreement — also called an operating agreement — is a legally binding contract among the members of a limited liability company that governs ownership interests, capital contributions, voting rights, profit distributions, management authority, and exit procedures. It functions as the LLC's internal constitution, replacing state default rules with terms the members actually agreed to. Most states do not require one to be filed publicly, but operating without one exposes members to unpredictable default statutory rules.

Most US states do not require a written LLC operating agreement to form an LLC, but several — including California, Delaware, Maine, Missouri, and New York — do require one. Even in states where it is not mandatory, virtually every business attorney recommends executing one before the LLC begins operations. Without a written agreement, state default rules govern disputes, often producing outcomes that differ sharply from what the members intended.

Articles of organization are the public formation document filed with the state to legally create the LLC — they contain minimal information such as the LLC name, registered agent, and management type. A membership agreement is a private contract among the members that governs the LLC's internal operations in full detail. Both are needed: the articles create the legal entity; the membership agreement governs how it actually runs.

Single-member LLCs benefit from an operating agreement even without multiple parties, primarily to document the owner's capital account, confirm the LLC's separation from the owner's personal finances, and satisfy banking requirements. However, a single-member operating agreement is structurally simpler — it omits voting, deadlock, and transfer provisions. This multi-member membership agreement template is designed for LLCs with two or more members.

Ownership percentages should reflect each member's relative capital contribution, sweat equity, and risk allocation — there is no legally mandated formula. Equal splits (e.g., 50/50 or 33/33/34) are common but carry deadlock risk for two-member LLCs. Contribution-weighted splits are more common in capital-intensive businesses. Whatever percentages are chosen, document the rationale and the valuation basis for any non-cash contributions at the time of agreement.

Without a written agreement, the departing member's rights are governed entirely by state default LLC statutes, which vary significantly. In most states, a member cannot be forced out, their interest cannot be bought out at a mandated price, and there is no defined valuation mechanism. The result is typically a protracted negotiation or litigation. A written agreement with a defined exit and valuation procedure resolves this in days rather than months.

Yes. Every member whose name appears in the agreement must sign it for the document to be binding on all parties. New members added after the initial formation typically sign a joinder agreement — a short document confirming they have read and agree to be bound by the existing membership agreement — rather than requiring all original members to re-sign a new agreement.

Yes, but amendment typically requires the approval threshold specified in the agreement — commonly a supermajority (66% or 75%) or unanimous consent for fundamental changes. The agreement should specify both the vote required to amend and the process (written notice, a stated period for review, and a signed written amendment). Oral amendments are generally not enforceable.

For simple two-member LLCs with equal splits and straightforward operations, a high-quality template reviewed by the members is usually sufficient. Engage a lawyer when the LLC has three or more members with unequal economics, when the business involves significant assets or IP, when members are in different states or countries, when special tax allocations are planned, or when outside investors are involved. A 2–3 hour attorney review typically costs $400–$900 and is strongly recommended before any significant capital is contributed.