Operating Agreement LLC Indiana

An Indiana Limited Liability Company (LLC) Operating Agreement is an internal document that describes how the LLC will be governed. It outlines ownership interests, defines management roles, and establishes the procedures members will follow in operating the business. Some refer to it as an Indiana Operating Agreement or Indiana LLC Company Agreement. Regardless of the term used, it serves as the LLC’s primary internal governance document.

Many LLC owners in Indiana draft the agreement during the formation stage, while others adopt one later as the company develops. The Operating Agreement is not filed with the state and is kept as part of the LLC’s permanent records.

Is an Indiana Operating Agreement Required?

Indiana does not require LLCs to maintain an Operating Agreement. Under the Indiana Business Flexibility Act, an Operating Agreement may be written, oral, or implied. Although optional, preparing a written Operating Agreement is strongly recommended. Without one, the LLC defaults to Indiana’s statutory provisions, which may not reflect the members intended structure or financial arrangements.

Why an Indiana Operating Agreement Matters

Protects limited liability status

A written Operating Agreement helps demonstrate that the LLC operates separately from its members. Courts may refer to internal documents when evaluating whether limited liability protections should apply, especially for single member LLCs.

Establishes internal governance rules

Indiana’s default rules apply only when an Operating Agreement does not address a particular matter. A written agreement allows members to define their own procedures for voting, distributions, management responsibilities, and dispute resolution.

Required by financial institutions and partners

Banks, lenders, accountants, and professional advisers often request an Operating Agreement to verify ownership information and confirm who has authority to act for the LLC.

Supports compliance with Indiana’s Business Entity Report requirement

Indiana requires LLCs to file a Business Entity Report every two years. Assigning responsibility for this task within the Operating Agreement helps ensure ongoing compliance.

Key Provisions to Include in an Indiana Operating Agreement

Basic Company Details

• LLC name
• Business purpose
• Principal office address
• Duration of the LLC
• Federal tax classification

Indiana requires LLC names to include Limited Liability Company, LLC, or an accepted abbreviation.

Registered Agent and Office

• Name and Indiana street address of the registered agent
• Procedures for updating registered agent information
• Filing obligations with the Indiana Secretary of State

Member Information

• Names and addresses of all members
• Ownership percentages
• Initial capital contributions

Capital Contributions

• Description of contributions made by members
• Rules for future contributions
• Statement that contributions do not earn interest unless agreed

Management Structure

• Identification of whether the LLC is member managed or manager managed
• Duties and authority of managers or members
• Procedures for appointing or removing managers

Profit and Loss Allocation

• Allocation method for profits and losses
• Rules and timing for distributions
• Confirmation that distributions may only occur if the LLC can satisfy its obligations

Tax Election

• Federal tax classification selected by the LLC
• Statement that certain IRS elections require additional filings

Voting Procedures

• Member voting rights
• Quorum requirements
• Vote thresholds needed for approving actions

Indiana LLCs commonly use ownership-based voting unless modified within the agreement.

Transfers of Interest

• Rules governing voluntary or involuntary transfers
• Admission procedures for new members
• Handling of interests when a member withdraws, dies, or is expelled

Records and Bookkeeping

• Procedures for maintaining company records and financial documents
• Assignment of responsibility for filing Indiana’s biennial Business Entity Report
• Statement that failure to file may result in administrative consequences

Compensation

• Policies for compensating members, managers, or officers
• Reimbursement rules for expenses

Dissolution

• Events that may trigger dissolution
• Steps for properly winding up the LLC
• Filing of Articles of Dissolution with the Indiana Secretary of State

Amendments

• Procedures for modifying the Operating Agreement
• Requirement that amendments be approved in writing unless otherwise specified

Management Options for Indiana LLCs

Member Managed

Members are responsible for daily operations and have authority to act on behalf of the LLC. This structure works well for small or closely held companies. Voting typically corresponds to ownership percentages unless modified in the agreement.

Manager Managed

Members appoint one or more managers to oversee day-to-day operations. Managers may be members or nonmembers. Members retain authority over major decisions while delegating routine responsibilities to appointed managers.

Creating and Maintaining the Indiana Operating Agreement

Drafting and Signing

The Operating Agreement becomes effective once adopted by the members. Although Indiana law recognizes written, oral, and implied agreements, a written version helps prevent disputes and provides clearer guidance.

Recordkeeping

The agreement should be kept with the LLC’s permanent documents. Indiana requires biennial filings, making accurate recordkeeping important for maintaining good standing.

Amending the Agreement

Members may update the Operating Agreement by following the amendment process described within the document. If amendments affect state-filed information, the LLC may need to update its records with the Secretary of State.