Pennsylvania LLC Operating Agreement

Every Pennsylvania LLC should have an operating agreement in place. 

While not legally required by the state, having a written operating agreement will set clear rules and expectations for the management and operations of your LLC.

Download our free Pennsylvania operating agreement template below or sign up to create a custom operating agreement using our free tool.

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Free Pennsylvania LLC Operating Agreement Templates

We offer operating agreement templates for single-member LLCs and multi-member LLCs (including member-managed and manager-managed) as well as a customizable operating agreement tool.

Single-Member LLC Operating Agreement

Our single-member LLC operating agreement template was created for limited liability companies with only one member, where the sole member has full control over all affairs of the LLC and no other individuals have a membership interest in the company.

Multi-Member LLC Operating Agreements

Our multi-member LLC templates are meant for LLCs with more than one member. There are two types available: manager-managed and member-managed.

Create Custom Operating Agreement

Create a custom operating agreement using our free tool. Just answer a few basic questions, and the tool will develop an operating agreement for your new LLC.

To use our tool, you will need to sign in to our Business Center. A Business Center account will also grant you access to many other free tools, special discounts on business services, and much more. 

TRUiC’s Operating Agreement Tool

Use our free tool to create a custom operating agreement for your LLC.

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What Is a Pennsylvania LLC Operating Agreement?

An operating agreement is a legal document that outlines the ownership structure and operating procedures of an LLC.

Whether you are starting a single-member or multi-member LLC, your operating agreement should address all of the topics below. Some of these stipulations will not have much bearing on the actual operations of a single-member LLC, but are still important to include for the sake of legal formality.

1. Organization: When the LLC was officially formed, who its members are, and how ownership is divided. Multi-member LLCs may utilize an equal ownership structure or assign various members different “units” of ownership.
2. Management & Voting: Whether the LLC will be managed by its members or by an appointed manager, and how members will go about voting on business matters. Typically, each member has one vote, but you may wish to give some members more voting power than others. For more information on managing your LLC, read our Member-Managed vs Manager-Managed guide.
3. Capital Contributions: The amount of money each member has invested in the business. This is also where you should establish an approach to raising additional funds in the future.
4. Distributions: How profits and losses will be divided among the members. The most common option is to distribute profits evenly. If you want them divided a different way, this should be detailed in your operating agreement. For more information on the basics of LLC ownership, read our Contributions and Distributions guide.
5. Changes to Membership Structure: How roles and ownership will be transferred in the event that a member leaves the company. It’s essential to lay out the process for buying out and/or replacing a member in the LLC’s governing document.
6. Dissolution: Dissolution: If at some point all the members of your LLC decide you no longer wish to conduct business, you should officially dissolve it. Outlining the hypothetical process of dissolving your business is an important aspect of your operating agreement. To learn how to dissolve your Pennsylvania LLC, read our Pennsylvania LLC Dissolution article.

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Why Should I Have a Pennsylvania LLC Operating Agreement?

No matter what type of Pennsylvania LLC you're starting, you'll want to create an operating agreement. Here's why:

1. It’s recommended by the state. According to Pennsylvania Consolidated Statutes Partnership Code § 8815, all members of a Pennsylvania LLC may enter into an operating agreement to regulate the internal affairs of the company.
2. It'll prevent conflict among your business partners. If you're starting a multi-member LLC, having an operating agreement will prevent misunderstandings amongst your team by setting clear expectations about each partner's role and responsibilities.
3. It helps preserve your limited liability status. If you're the sole owner of a single-member LLC in Pennsylvania, having an operating agreement will help to ensure your limited liability status is upheld by court officials, and add to your business's credibility as a whole.

The full text of the statute can be found below:

(a)  Scope of operating agreement.--Except as provided under subsections (c) and (d), the operating agreement governs:

(1)  relations among the members as members and between the members and the limited liability company;
(2)  the rights and duties under this title of a person in the capacity of a member or manager;
(3)  the activities and affairs of the company and the conduct of those activities and affairs;
(4)  the means and conditions for amending the operating agreement; and
(5)  the means and conditions for approving a transaction under Chapter 3 (relating to entity transactions).

(b)  Title applies generally.--To the extent the operating agreement does not provide for a matter described in subsection (a), this title governs the matter.
(c)  Limitations.--An operating agreement may not do any of the following:

(1)  Vary a provision of Chapter 1 (relating to general provisions) or Subchapter A of Chapter 2 (relating to names).
(2)  Vary the right of a member to approve a merger, interest exchange, conversion, division or domestication under section 333(a)(2) (relating to approval of merger), 343(a)(2) (relating to approval of interest exchange), 353(a)(3) (relating to approval of conversion), 363(a)(2) (relating to approval of division) or 373(a)(2) (relating to approval of domestication).
(3)  Vary the required contents of a plan of merger under section 332(a) (relating to plan of merger), plan of interest exchange under section 342(a) (relating to plan of interest exchange), plan of conversion under section 352(a) (relating to plan of conversion), plan of division under section 362(a) (relating to plan of division) or plan of domestication under section 372(a) (relating to plan of domestication).
(4)  Vary a provision of Chapter 81 (relating to general provisions).
(5)  Vary the provisions of section 8811(b), (c) and (d) (relating to short title and application of chapter).
(6)  Vary the law applicable under section 8814 (relating to governing law).
(7)  Vary a provision of section 8818(d) (relating to characteristics of limited liability company).
(8)  Vary a provision of section 8819 (relating to powers).
(9)  Vary any requirement, procedure or other provision of this title pertaining to:

(i)  registered offices; or
(ii)  the department, including provisions pertaining to documents authorized or required to be delivered to the department for filing under this title.

(10)  Provide indemnification or exoneration in violation of the limitations in sections 8848(g) (relating to reimbursement, indemnification, advancement and insurance), 8849.1(j) (relating to standards of conduct for members) and 8849.2(h) (relating to standards of conduct for managers).
(11)  Eliminate the duty of loyalty provided for in section 8849.1(b)(1)(i) or (ii) or (2) or the duty of care of a member in a member-managed company, except as provided in subsection (d).
(12)  Eliminate the duty of loyalty provided for in section 8849.2(b)(1)(i) or (ii) or (2) or the duty of care of a manager, except as provided in subsection (d).
(13)  Vary the contractual obligation of good faith and fair dealing under section 8849.1(d) or 8849.2(d), except as provided in subsection (d).
(14)  Restrict the duties and rights under section 8850 (relating to rights to information), except as provided in subsection (d).
(15)  Vary the causes of dissolution specified in section 8871(a)(4) (relating to events causing dissolution).
(16)  Vary the requirements to wind up the company's activities and affairs specified in section 8872(a), (b)(1), (e) and (f) (relating to winding up and filing of certificates).
(17)  Unreasonably restrict the right of a member to maintain an action under Subchapter H (relating to actions by members).
(18)  Vary the provisions of section 8884 (relating to special litigation committee), except that the operating agreement may provide that the company may not have a special litigation committee.
(19)  Vary a provision of Subchapter I (relating to benefit companies).
(20)  Except as provided in section 8817(b) (relating to amendment and effect of operating agreement), restrict the rights under this title of a person other than a member or manager.

(d)  Permitted terms.--Subject to subsection (c)(10), the following rules apply:

(1)  The operating agreement may:

(i)  specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts;
(ii)  alter the prohibition stated in section 8845(a)(2) (relating to limitations on distributions) so that the prohibition requires only that the company's total assets not be less than the sum of its total liabilities; and
(iii)  impose reasonable restrictions on the availability and use of information obtained under section 8850 and may define appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use.

(2)  To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of a responsibility that the member would otherwise have under this title and imposes the responsibility on one or more other members, the operating agreement also may eliminate or limit any fiduciary duty of the member relieved of the responsibility that would have pertained to the responsibility.
(3)  If not manifestly unreasonable, the operating agreement may:

(i)  alter the aspects of the duty of loyalty stated under section 8849.1(b)(1)(i) or (ii) or (2) or 8849.2(b)(1)(i) or (ii) or (2);
(ii)  prescribe the standards, if not manifestly unreasonable, by which the performance of the contractual obligation of good faith and fair dealing under section 8849.1(d) or 8849.2(d) is to be measured;
(iii)  identify specific types or categories of activities that do not violate the duty of loyalty;
(iv)  alter the duty of care; and
(v)  alter or eliminate any other fiduciary duty.

(e)  Determination of manifest unreasonableness.--The court shall decide as a matter of law whether a term of an operating agreement is manifestly unreasonable under subsection (d)(3). The court:

(1)  shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and
(2)  may invalidate the term only if, in light of the purposes, activities and affairs of the limited liability company, it is readily apparent that:

(i)  the objective of the term is unreasonable; or
(ii)  the term is an unreasonable means to achieve the term's objective.

After Creating Your Pennsylvania LLC Operating Agreement

Once you have finished your operating agreement, you do not need to file it with your state. Keep it for your records and give copies to the members of your LLC.

Following any major company event, such as adding or losing a member, it is a good idea to review and consider updating the operating agreement. Depending on how your operating agreement is written, it may require some or all of the members to approve an amendment to the document.

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