Virginia LLC Operating Agreement Template

In Virginia, 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 Virginia 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 LLC’s Operating Agreement Include?

The operating agreement should include the following elements:

1. Preamble: The preamble should include the name of the LLC, the date of formation, the state of formation (Virginia), and the names and addresses of the members.
2. Purpose of the LLC: Clearly outline the purpose of the business and the scope of its activities.
3. Duration: Specify the duration of the LLC, whether it’s perpetual or for a specific term.
4. Registered Agent and Office: Include the name and address of the registered agent and office in Virginia.
5. Member Information:
   • a. The percentage of each member’s interests in the LLC
   • b. How profits and losses will be allocated to each member
   • c. Each member’s rights and responsibilities
   • d. Initial capital contributions made by each member
6. Management Structure:
   • a. Specify whether the LLC will be member-managed or manager-managed
   • b. The management roles and decision-making authority of members or managers
   • c. The voting rights of each member, including the percentage required for a majority or supermajority vote
   • d. Rules for meetings and voting, including how often meetings will be held, notice requirements, and quorum
7. Distributions: Define the process for making distributions of profits to members, including the timing and frequency of distributions.
8. Recordkeeping and Accounting: Describe the accounting method, fiscal year, and recordkeeping requirements for the LLC.
9. Admission of New Members: Outline the process for admitting new members, including any required approvals and conditions.
10. Withdrawal, Resignation, or Expulsion of Members: Detail the procedure for voluntary withdrawal or resignation of a member and the circumstances under which a member can be expelled.
11. Transfers and Buyouts:
    • a. What happens when a member sells their interest
    • b. What happens when a member becomes disabled or dies
    • c. Any restrictions on transferring or selling a member’s interest
    • d. Rights of first refusal, buy-sell provisions, or other mechanisms for dealing with the sale or transfer of a member’s interest
12. Dissolution and Winding Up: Establish the process for dissolving the LLC, including the distribution of assets and liabilities among the members.
13. Dispute Resolution: Include a dispute resolution mechanism, such as arbitration or mediation, to address conflicts that may arise among members.
14. Indemnification: Specify the terms for indemnifying members or managers for legal claims arising from their roles in the LLC.
15. Amendments: Define the procedure for amending the Operating Agreement, including any required approvals and notice provisions.
16. Governing Law: State that the Operating Agreement will be governed by the laws of Virginia.
17. Severability: Include a severability clause, which states that if any part of the Operating Agreement is found to be unenforceable, the remaining provisions will still be in effect.
18. Signatures: Ensure that all members sign and date the Operating Agreement to make it legally binding.

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 Virginia 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. 

Remember that each LLC is unique, so it’s important to customize your Operating Agreement to suit the specific needs and requirements of your business. Consulting with an attorney experienced in Virginia LLC law can help ensure that your Operating Agreement is comprehensive and compliant with state 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 Virginia, 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.