Ohio LLC Operating Agreement
Every Ohio 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 Ohio operating agreement template below or sign up to create a custom operating agreement using our free tool.
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Free Ohio 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 an Ohio 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 Ohio LLC, read our Ohio LLC Dissolution article.
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Why Should I Have an Ohio LLC Operating Agreement?
No matter what type of Ohio LLC you're starting, you'll want to create an operating agreement. Here's why:
- It’s recommended by the state. According to Ohio Revised Code, Revised Limited Liability Company Act § 1706.08, all members of an Ohio LLC may enter into an operating agreement to regulate the internal affairs of the company.
- 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 Ohio, 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) Except as otherwise provided in divisions (B) and (C) of this section, both of the following apply:
(1) An operating agreement governs relations among the members as members and between the members and the limited liability company.
(2) To the extent that an operating agreement does not otherwise provide for a matter described in division (A)(1) of this section, this chapter governs the matter.
(1) To the extent that, at law or in equity, a member, manager, or other person has duties, including fiduciary duties, to the limited liability company, or to another member or to another person that is a party to or is otherwise bound by an operating agreement, those duties may be expanded or restricted or eliminated by a written operating agreement. However, an operating agreement may not eliminate the implied covenant of good faith and fair dealing.
(2) A written operating agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties, including breach of fiduciary duties, of a member, manager, or other person to a limited liability company or to another member or to another person that is a party to or is otherwise bound by an operating agreement. However, an operating agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied covenant of good faith and fair dealing.
(3) A member, manager, or other person shall not be liable to a limited liability company or to another member or to another person that is a party to or is otherwise bound by an operating agreement for breach of fiduciary duty for the member's or other person's good faith reliance on the operating agreement.
(4) An operating agreement may provide either or both of the following:
(a) That, a member or assignee who fails to perform in accordance with, or to comply with the terms and conditions of, the operating agreement shall be subject to specified penalties or specified consequences;
(b) That at the time or upon the happening of events specified in the operating agreement, a member or assignee may be subject to specified penalties or consequences.
(5) A penalty or consequence that may be specified under division (B)(4) of this section may include any of the following:
(a) Reducing or eliminating the defaulting member's or assignee's proportionate interest in a limited liability company;
(b) Subordinating the member's or assignee's membership interest to that of nondefaulting members or assignees;
(c) Forcing a sale of the member's or assignee's membership interest;
(d) Forfeiting the defaulting member's or assignee's membership interest;
(e) The lending by other members or assignees of the amount necessary to meet the defaulting member's or assignee's commitment;
(f) A fixing of the value of the defaulting member's or assignee's membership interest by appraisal or by formula and redemption or sale of the membership interest at that value;
(g) Any other penalty or consequence.
(C) An operating agreement shall not do any of the following:
(1) Vary the nature of the limited liability company as a separate legal entity under division (A) of section 1706.04 of the Revised Code;
(2) Except as otherwise provided in division (B) of section 1706.082 of the Revised Code, restrict the rights under this chapter of a person other than a member, dissociated member, or assignee;
(3) Vary the power of a court under section 1706.171 of the Revised Code;
(4) Eliminate the implied covenant of good faith and fair dealing;
(5) Eliminate or limit the liability of a member or other person for any act or omission that constitutes a bad faith violation of the implied covenant of good faith and fair dealing;
(6) Waive the requirements of division (A) of section 1706.281 of the Revised Code;
(7) Waive the prohibition on issuance of a certificate of a membership interest in bearer form under division (D) of section 1706.341 of the Revised Code;
(8) Waive the requirements of division (B) of section 1706.761 of the Revised Code.
After Creating Your Ohio 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
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 Ohio Secretary of State.