Maryland LLC Operating Agreement Template

In Maryland, your limited liability company (LLC) is not required to have an operating agreement in place. But it’s highly recommended, as an effective operating agreement can help avoid disputes and lawsuits that could threaten the stability of your LLC. 

What is an LLC Operating Agreement?

A Maryland LLC operating agreement is an important legal document that details who owns the business and provides essential information pertaining to member duties. An LLC operating agreement establishes the financial relationship between members and the basics of the working relationships between those members and the managers who oversee daily operations. 

The operating agreement is not filed with the state of Maryland, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.

What Should Your Maryland LLC’s Operating Agreement Include?

Although the specific provisions can vary based on your LLC’s needs, there are several key elements that should be included in most Operating Agreements:

1. Basic Information:
   • The name of the LLC
   • The principal place of business
   • The purpose of the LLC
   • The duration of the LLC, if not perpetual
2. Member Information:
   • Names and addresses of all members
   • Ownership interests or percentage of each member
   • Capital contributions of each member
3. Management Structure:
   • Indicate whether the LLC is member-managed or manager-managed
   • If manager-managed, specify the names and duties of the managers
   • Decision-making process and voting rights
   • If the LLC has a board of directors, the operating agreement will also include the role and responsibilities of the board members and how they are compensated
4. Distributions:
   • The method and frequency of profit and loss distributions
   • Any special allocations or preferences among members
5. Meetings and Voting:
   • The frequency and procedures for member meetings
   • The quorum and voting requirements for making decisions
6. Admission and Withdrawal of Members:
   • The process for admitting new members
   • The process for withdrawing or transferring membership interests
7. Buyout and Buy-Sell Provisions:
   • Provisions for the valuation and purchase of a member’s interest in case of death, disability, or other triggering events
   • Restrictions on the transfer of membership interests
8. Dissolution and Winding Up:
   • The conditions and procedures for dissolving the LLC
   • The process for distributing remaining assets and liabilities after dissolution
9. Amendments:
   • The procedure for amending the Operating Agreement
10. Miscellaneous Provisions:
    • Indemnification and liability protection for members and managers
    • Governing law and dispute resolution mechanisms
    • Recordkeeping requirements and inspection rights for members
    • Any other provisions specific to your LLC

An LLC operating agreement provides legal and financial recourse for a number of situations. If conflicts arise between LLC owners pertaining to any of the above issues, the operating agreement will provide clarity. The specific language of the operating agreement lays out exactly how such conflicts will be resolved, how the business is structured, the dynamics of operations, and more. 

Though Maryland has default rules on the books that address some of the issues that might arise between LLC members, your LLC operating agreement would override these default laws and give you greater control.

It’s a good idea to consult with an attorney experienced in LLC formation and operating agreements to ensure that your Operating Agreement meets the specific needs of your Maryland LLC and complies with state law.

How Much Does an Operating Agreement Cost? 

Creating an operating agreement is free if you just draw it up yourself. Alternatively, you can pay for guidance from an online business advisory like ZenBusiness.

This is an extremely important document, so it’s recommended that you hire a professional service or law firm. If you choose to use an attorney to help you create this document, the price will be around $500 for a single-member LLC and $2,500 for a multi-member LLC. 

Who Needs my LLC Operating Agreement?

One of the key reasons to have an operating agreement in place is that it makes your LLC more appealing to financial backers. Banks are likely to request to see your operating agreement when you apply for a loan. If you seek funding from investors, they will also want to see your operating agreement. 

Conclusion 

Though not legally required in Maryland, an operating agreement is a crucial document for LLC operations, ensuring your company is able to access adequate financing and settle any disputes. Keep in mind, you do not need to file your operating agreement with any state body. You simply need to take certain steps to ensure it’s legally binding and keep it in your records. 

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