Minnesota LLC Operating Agreement Template

In Minnesota, 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 Minnesota 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, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.

What Should Your Minnesota LLC’s Operating Agreement Include?

Here are some key provisions that a Minnesota LLC’s Operating Agreement should include:

1. Basic information:
   • The name of the LLC
   • The purpose of the LLC
   • The principal place of business
   • The duration of the LLC (if not perpetual)
2. Members and ownership structure:
   • Names and addresses of all members
   • Ownership percentages for each member
   • Initial capital contributions and any additional capital contributions required in the future
   • Procedures for admitting new members
3. Management structure:
   • Determine whether the LLC will be member-managed or manager-managed
   • List the duties and responsibilities of members or managers
   • Define the decision-making process, including voting rights and quorum requirements
   • 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. Allocation of profits and losses:
   • Specify how profits and losses will be allocated among members
   • Outline the timing and procedures for distributions
5. Tax classification:
   • Specify the tax classification for the LLC (e.g., partnership, corporation, or disregarded entity)
6. Meeting requirements:
   • Details on annual or regular meetings of members, if required
   • Notice requirements and procedures for calling special meetings
7. Record-keeping and reporting:
   • Specify the required records and documents to be maintained
   • Outline the procedures for providing financial and operational information to members
8. Buyout and transfer provisions:
   • Procedures for transferring membership interests or selling the LLC
   • Rights of first refusal or other restrictions on transfers
   • Buy-sell provisions in case of death, disability, or other triggering events
9. Dissolution and winding up:
   • Events that trigger dissolution
   • Procedures for winding up the LLC and distributing assets to members
10. Dispute resolution:
    • Methods for resolving disputes among members (e.g., mediation, arbitration, or litigation)

11. Amendment process:
    • Specify how the Operating Agreement can be amended, including the necessary vote or consent of members

12. Miscellaneous provisions:
    • Governing law (typically the law of the state in which the LLC is organized)
    • Severability of provisions
    • Entire agreement and waiver of prior agreements

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 Minnesota 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.  

While these are some of the essential provisions to include in a Minnesota LLC’s Operating Agreement, it is recommended that you consult with an attorney to ensure that your Operating Agreement is tailored to your specific business needs and complies with all applicable state laws and regulations.

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 Minnesota, 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.