Kentucky LLC Operating Agreement
Every Kentucky 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 Kentucky operating agreement template below or sign up to create a custom operating agreement using our free tool.
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Free Kentucky 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.
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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.
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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.
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What Is a Kentucky LLC Operating Agreement?
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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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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 Kentucky LLC, read our Kentucky LLC Dissolution article.
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Why Should I Have a Kentucky LLC Operating Agreement?
No matter what type of Kentucky LLC you're starting, you'll want to create an operating agreement. Here's why:
- It’s recommended, but not required by the state. According to Kentucky Revised Statutes, Limited Liability Company Act § 275.175, every Kentucky LLC should adopt a written or oral operating agreement to govern the company’s operating procedures.
- 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.
- It helps preserve your limited liability status. If you're the sole owner of a single-member LLC in Kentucky, 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:
(1) Unless otherwise provided in the articles of organization, a written operating agreement, or this chapter, the affirmative vote, approval, or consent of a majority-in-interest of the members or a simple majority of the managers, each having a single vote, shall be required to decide any matter connected with the business affairs of the limited liability company.
(2) Unless otherwise provided in a written operating agreement, irrespective of whether management of the limited liability company is vested in a manager or managers, the affirmative vote, approval, or consent of the members shall be required to:
(a) Amend a written operating agreement;
(b) Authorize a manager or member to do any act on behalf of the limited liability company that contravenes an operating agreement, including any written provision thereof which expressly limits the purpose, business, or affairs of the limited liability company or the conduct thereof;
(c) Amend the articles of organization;
(d) Merge or convert the limited liability company or approve a sale of all or substantially all of its assets;
(e) Admit a new member, including the assignee of a member, as a member;
(f) Remove a member after the assignment of all assignable interest in the limited liability company;
(g) Waive an agreement to contribute to the limited liability company;
(h) Approve the voluntary dissolution of the limited liability company;
(i) Approve any acting contravention of a written operating agreement; or
(j) Allow the voluntary resignation of a member from a manager-managed limited liability company.
(3) Unless otherwise provided in the articles of organization, a written operating agreement, or this chapter, for all purposes of this chapter, the members of a limited liability company shall vote, approve, or consent in proportion to their contributions, based upon the agreed value as stated in the records of the limited liability company as required by KRS 275.185, made by each member to the extent they have been received by the limited liability company and have not been returned.
(4) In a nonprofit limited liability company that does not have members, the capacity and authority to manage the business and affairs of the company shall be set forth in a written operating agreement.
(5) Unless otherwise provided in the articles of organization or the written operating agreement, no member of a limited liability company shall have the right to dissent from an amendment to the operating agreement or the articles of organization.
(6) An operating agreement may set forth provisions relating to notice of the time, place, or purpose of any meeting at which any matter is to be voted on by any members, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum, and voting requirements, voting in person or by proxy, or any other matter with respect to the exercise of any such right to vote, approve, or consent.
(7) Except as otherwise provided in a written operating agreement, an action requiring the vote, approval, or consent of the members may be taken without a meeting and without prior notice if the vote, approval, or consent is set forth in a writing approved by not less than the necessary number, percentage, or threshold of members, interests, or votes.
After Creating Your Kentucky 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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Frequently Asked Questions
Yes. Although you won’t file your operating agreement with the state, Kentucky highly recommends that you have a “written or oral” operating agreement in place.
While it's a good idea to create an operating agreement before filing your Articles of Organization, the state does not discourage LLCs from waiting until the formation process is complete. It's worth noting that some banks require you to submit an operating agreement in order to open a business bank account.
No. Operating agreements are to be retained by the LLC members. There is no need to file your operating agreement with the Kentucky Secretary of State.