New York LLC Operating Agreement Template

In New York, your limited liability company (LLC) is required to have an operating agreement in place. Even though an operating agreement isn’t filed with the state of New York, the document persists to be an effective way to help avoid disputes and lawsuits that could threaten the stability of your business. 

What is an LLC Operating Agreement?

A New York 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. 

Again, the operating agreement is not filed with the state.  Instead, it remains a private internal company document. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.

What Should Your New York LLC’s Operating Agreement Include?

The operating agreement should clearly define:

1. Preamble

• Name of the LLC
• State of formation (New York)
• The date of formation
• Statement that the agreement complies with the New York Limited Liability Company Law

2. Members and Ownership

• Names and addresses of all members
• Ownership percentage or units held by each member
• Initial capital contributions of each member
• Additional capital contributions, if applicable
• Rules for allocating profits, losses, and distributions among members
• Guidelines for transferring membership interests
• 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. 

3. Management Structure

• Specify whether the LLC will be member-managed or manager-managed
• For a member-managed LLC, outline the decision-making process and voting rights
• For a manager-managed LLC, list the names and addresses of appointed managers, their roles, and decision-making authority

4. Meetings and Voting

• Procedure for calling, conducting, and documenting member meetings
• Quorum requirements for meetings
• Voting rights and procedures (e.g., majority vote or unanimous consent)
• Notice requirements for meetings

5. Roles and Responsibilities

• Outline the roles, responsibilities, and authority of each member or manager
• Procedures for hiring employees or independent contractors
• Guidelines for entering into contracts or making financial decisions on behalf of the LLC

6. Recordkeeping and Financial Matters

• Designation of a fiscal year
• Bookkeeping and accounting methods to be used (e.g., cash or accrual basis)
• Requirements for maintaining financial records
• Procedures for preparing and distributing annual financial statements

7. Dissolution and Liquidation

• Events that trigger dissolution of the LLC
• Process for winding up the LLC’s affairs, including the distribution of remaining assets
• Applicable New York state requirements for filing a Certificate of Dissolution

8. Amendments and Governing Law

• Process for amending the operating agreement
• Statement that the agreement is governed by the laws of New York

9. Dispute Resolution

• Procedures for handling disputes among members or between members and the LLC
• Consider including mediation, arbitration, or other alternative dispute resolution methods

10. Miscellaneous Provisions

• Confidentiality and non-compete clauses, if applicable
• Indemnification and liability protection for members and managers
• Severability clause (if one provision is found invalid, the rest of the agreement remains enforceable)
• Entire agreement clause, stating that the operating agreement supersedes any prior agreements

11. Execution

• Signatures of all members and, if applicable, managers
• Date of execution

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 New York does have 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. 

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?

Regardless of state requirements, 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 

New York legally requires LLCs to create an operating agreement.  Even if the state did not require an operating agreement, it’s a crucial document that ensures your company is able to access adequate financing and settle any disputes. Remember, you do not file your operating agreement with any New York 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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