An operating agreement is the rulebook for your LLC. Here is what it should cover and how to check an AI draft.

Key takeaways:

• An operating agreement sets ownership, decisions, money, and exit rules for an LLC.
• Without one, state default rules fill the gaps and may not match your deal.
• AI can draft a first version, but may use the wrong state’s rules or miss exit terms.
• Check state, facts, money, and exit terms, then consider lawyer review before signing.

Most LLC disputes are about money, control, or someone leaving. A written agreement is how you decide those things in advance.

1. What an operating agreement does

An operating agreement is the document that sets the rules for how an LLC is owned and run. Some states require one and others do not, but even where it is optional, having one in writing is widely recommended, especially with more than one owner.

2. Why default rules are not enough

Without a written agreement, state default rules fill the gaps. Those rules may not match what you and your co-owners actually agreed. Disagreements about money, control, or departures are much harder to resolve if nothing is written.

3. The questions your agreement should answer

• Who are the members and what percentage does each own?
• What did each person contribute, in cash, property, or work?
• Who makes day-to-day decisions, and which decisions need everyone’s agreement?
• How and when are profits distributed?
• What happens if a member wants to leave, dies, or stops contributing?
• Can an owner sell their interest, and who gets first choice?
• How does the company end?

If there are co-founders, also see co-founder agreements.

4. Using AI to draft one

AI can produce a decent first draft and explain each section in plain language. It can also use the wrong state’s rules, assume facts you did not give, or leave out the exit terms that cause the most trouble. Give it your real facts and ask it to flag assumptions.

5. Check the draft

Read it as if you were the co-owner you trust least. Is the money section right? Does the exit section work in a bad scenario? Our guide on verifying AI-generated legal documents walks through this. Consider lawyer review of an AI draft before everyone signs.

6. Where DoubleCheck fits

DoubleCheck is built for businesses that start legal work with AI. Bring your question or draft, use an AI-first workflow to understand and verify it, and when professional advice is warranted, you can connect with an independent attorney. Attorneys on DoubleCheck are independent professionals; an attorney-client relationship forms only if an attorney accepts your engagement.

FAQ

What is an LLC operating agreement?

It is the document that sets how an LLC is owned and run, including ownership, decisions, distributions, and exits.

Is an operating agreement required?

Requirements vary by state, but a written agreement is widely recommended, especially with multiple owners.

Can AI write an operating agreement?

AI can draft a first version, but you should verify it against your state’s rules and your actual deal.

What is the most overlooked part?

Exit terms: what happens if an owner leaves, dies, sells, or stops contributing.

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General information only. This article is not legal, tax, investment, or accounting advice.