Every Maryland 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 Maryland operating agreement template below or sign up to create a custom operating agreement using our free tool.
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Free Maryland 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.
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 Maryland 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.
- 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 Maryland LLC, read our Maryland LLC Dissolution article.
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Why Should I Have a Maryland LLC Operating Agreement?
No matter what type of Maryland LLC you're starting, you'll want to create an operating agreement. Here's why:
- It's recommended by the state. According to Maryland Statutes § 4A-402, every Maryland LLC may adopt an 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 Maryland, 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 statutes can be found below:
(a) Except for the requirement set forth in § 4A–404 of this subtitle that certain consents be in writing, members may enter into an operating agreement not inconsistent with the articles of organization to regulate or establish any aspect of the affairs of the limited liability company, the conduct of its business, or the relations of its members, including provisions establishing:
(1) The manner in which the business and affairs of the limited liability company shall be managed, controlled, and operated, which may include the granting of exclusive authority to manage, control, and operate the limited liability company to persons who are not members;
(2) The manner in which the members will share the assets and earnings of the limited liability company;
(3) The rights of the members to assign all or a portion of their membership interest;
(4) The circumstances in which a person may be admitted as a member of the limited liability company;
(i) The right to have and a procedure for having a member’s membership interest evidenced by a certificate issued by the limited liability company, which may be issued in bearer form only if specifically allowed by the operating agreement;
(ii) The procedure for assignment, pledge, or transfer of any membership interest represented by the certificate; and
(iii) Any other provisions dealing with the certificate;
(6) The method by which the operating agreement may from time to time be amended, which may include a requirement that an amendment be approved:
(i) By a person who is not a party to the operating agreement or who is not a member of the limited liability company; or
(ii) On the satisfaction of other conditions specified in the operating agreement;
(7) The rights of any person, including a person who is not a party to the operating agreement or who is not a member of the limited liability company, to the extent set forth in the operating agreement;
(8) Procedures relating to:
(i) Notice of the time, place, or purpose of any meeting at which any matter is to be voted on by members;
(ii) Waiver of notice of meetings;
(iii) Action by consent without a meeting;
(iv) The establishment of a record date;
(v) Quorum requirements;
(vi) Voting in person or by proxy;
(vii) Voting rights of various classes of members; or
(viii) Any other matter with respect to the exercise of voting rights by members; or
(9) That a membership interest, an economic interest, or a noneconomic interest may or shall be transferred or assigned in whole or in part to one or more persons, including on the occurrence of any of the events described in § 4A–606 of this title, regardless of whether the persons to whom the interest is transferred or assigned are members.
(1) The initial operating agreement shall be agreed to by all persons who are then members.
(2) Unless the articles of organization specifically require otherwise, the operating agreement need not be in writing.
(1) If the operating agreement does not provide for the method by which the operating agreement may be amended, then all of the members must agree to any amendment of the operating agreement.
(2) To the extent that an operating agreement provides for the manner in which the operating agreement may be amended, the operating agreement may be amended only in that manner, provided that the approval of a person may be waived by the person and that conditions may be waived by a person for whose benefit the conditions were intended.
(i) Except as provided in subparagraph (ii) of this paragraph, or unless otherwise agreed, an amendment to an operating agreement is not required to be in writing.
(ii) An amendment to an operating agreement must be evidenced by a writing signed by an authorized person of the limited liability company if:
1. The amendment was adopted without the unanimous consent of the members; or
2. An economic interest in the limited liability company has been assigned to a person who has not been admitted as a member.
(4) A copy of any written amendment to the operating agreement shall be delivered to each member who did not consent to the amendment and to each assignee who has not been admitted as a member.
(1) A court may enforce an operating agreement by injunction or by granting such other relief which the court in its discretion determines to be fair and appropriate in the circumstances.
(2) As an alternative to injunctive or other equitable relief, when the provisions of § 4A–903 of this title are applicable, the court may order dissolution of the limited liability company.
(3) An operating agreement of a limited liability company with one member is not unenforceable on the grounds that there is only one person who is party to the operating agreement.
(4) A limited liability company:
(i) Is not required to execute its operating agreement; and
(ii) Is bound by its operating agreement, regardless of whether the limited liability company has executed the operating agreement.
(5) An operating agreement that is duly adopted or amended is binding on each person who is or becomes a member of the limited liability company and each person who is or becomes an assignee of a member of the limited liability company, regardless of whether the person has executed the operating agreement or amendment.
After Creating Your Maryland 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
Do I really need an operating agreement?
Yes. Although you won’t file this document with the state, having an operating agreement in place is the best way to maintain control of your Maryland LLC in the face of change or chaos.
When should I create my operating agreement?
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.
Do I need to file my operating agreement with the state?
No. Operating agreements are to be retained by the LLC members. There is no need to file your operating agreement with the state.