Operating Agreement LLC Indiana

An Indiana LLC Operating Agreement is an internal contract that explains how a limited liability company is owned, managed, and operated. It sets internal procedures, defines member responsibilities, and helps maintain a clear separation between the business and its owners.

Purpose of the Operating Agreement

An Operating Agreement serves several important functions:

• Delegates responsibilities: Defines the duties, powers, and terms of members and managers.
• Provides indemnification: Offers protection for members and managers when acting within their authority.
• Sets expectations: Documents ownership structure, profit allocation, debt management, and future amendment procedures.
• Ensures clarity: Describes operational procedures and business activities in a clear and organized way.
• Defines legal authority: Establishes powers and limitations under Indiana Code IC 23-18-1-16.

Is an Operating Agreement Required in Indiana

No. Indiana does not require LLCs to create or maintain a written Operating Agreement. However, the Indiana Secretary of State recommends having one, and courts often expect LLCs to produce an agreement when disputes arise.

Why an Operating Agreement Is Recommended

• Preserves limited liability: Shows formal separation between owners and the business, which supports liability protection.
• Overrides default rules: Allows members to replace Indiana’s standard rules, such as equal allocation of profits and losses.
• Meets external requirements: Banks, lenders, and investors commonly request a copy before opening accounts or approving financing.

Types of Operating Agreements

• Single-member Operating Agreement
• Multi-member Operating Agreement

Management may be structured in two ways:

• Member-managed: All members manage the business and can bind the LLC.
• Manager-managed: Designated managers handle daily operations, while members vote on major decisions only.

Key Components

A complete Indiana Operating Agreement often includes:

• Basic information: LLC name, formation date, purpose, duration, tax classification, and registered agent.
• Ownership structure: Each member’s ownership interest.
• Roles and responsibilities: Duties of members and managers.
• Initial capital contributions: Funds or property contributed by each member.
• Tax classification: The LLC’s federal tax status.
• Voting and decision-making procedures: Rules for voting and approval thresholds.
• Profit and loss distribution: How earnings and losses are divided.
• Meetings and recordkeeping: Procedures for meetings and maintenance of business records.
• Membership changes: Rules for adding or removing members and buyout terms.
• Dissolution procedures: Steps for winding up and distributing assets.

Finalizing and Storing the Agreement

Members should review and sign the agreement. Notarization is optional. The document is not filed with the Indiana Secretary of State and should be kept with company records. Any updates must be documented and stored with prior versions.

Most Indiana LLCs will also need an EIN from the IRS for financial, banking, and hiring activities.