Ohio LLC Operating Agreement Template

In Ohio, 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?

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

 

We’ve provided two operating agreement templates for your use. One is for a single-member LLC if you are the sole member, and the other is for a multi-member LLC if your LLC has two or more members. The documents are customizable and should be adjusted for Ohio state and your business. These documents are for your internal use and are not filed with any governing body.

Download FREE Operating Agreement Templates

Single Member Multi Member

Disclaimer: These documents may need to be adjusted based on your circumstances and may not cover all situations. Your document also may need to be adjusted over time as your business evolves. These documents should not be considered legal advice. You should have your version of the document reviewed by your attorney to make sure that all necessary provisions are included to fit your business situation. 

What Should Your Ohio LLC’s Operating Agreement Include?

The operating agreement should clearly define:

Percent of Ownership
Clearly define the ownership of the LLC either in percentages or units. This will establish each member’s stake in the company and their entitlement to profits, losses, and voting rights.

LLC Management Structure
Determine whether the LLC will be member-managed or manager-managed, and outline the roles and responsibilities of each management structure. 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. 

Members’ Roles and Responsibilities
Define each member’s role and ongoing responsibilities within the company, ensuring that all aspects of the business are covered.

Decision Making
Establish voting procedures, including each member’s share of voting power, how and when voting occurs, and the process for resolving tie votes.

Member Meetings
Specify meeting frequencies, procedures, and record-keeping requirements for documenting meeting minutes.

Admission and Removal of Members
Detail the process for admitting and removing members, including voluntary departure, removal for cause, and the handling of situations where a member becomes disabled or dies.

Transfer of Ownership
Outline buy-sell and buyout provisions for transferring ownership when a member is admitted or removed, preventing potential legal disputes.

Capital Contributions and Distributions
Describe the initial and any future capital contributions required from members, as well as the allocation of profits and losses and the method for making distributions.

Record Keeping and Financial Reporting
Establish guidelines for maintaining financial records, preparing financial statements, and selecting the accounting method (e.g., cash or accrual basis).

Tax Classification
Specify the LLC’s tax classification (e.g., partnership, S corporation, or C corporation) and any related tax obligations for members.

Dispute Resolution
Include a dispute resolution mechanism, such as mediation or arbitration, to handle conflicts among members and avoid costly litigation.

Indemnification and Liability
Outline provisions regarding the liability of members and managers, and the indemnification of members and managers for actions taken on behalf of the LLC.

Confidentiality and Non-Compete Clauses
Protect the LLC’s proprietary information and business interests by incorporating confidentiality and non-compete clauses applicable to members and managers.

Amendments to the Operating Agreement
Define the process for making amendments to the operating agreement, including any required voting thresholds or approval procedures.

LLC Dissolution
Detail the procedures for dissolving the LLC, including member voting requirements and the handling of remaining assets after debts are paid.

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 Ohio 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. By incorporating these elements into an Ohio LLC’s operating agreement, members can create a well-structured document that addresses various business scenarios and challenges that may arise, ensuring the company’s smooth operation and longevity.

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 Ohio, 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.