How to Make Sample Bylaws For an LLC? (Simple Guide)

Jon Morgan
Published by Jon Morgan | Co-Founder & Chief Editor
Last updated: February 28, 2024
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Bylaws are also referred to as a setup or operating agreement. It is an important part of an LLC since it dictates how the company is run and how it functions.

As a business consultant for limited liability companies across various states, I will provide you with detailed guidelines on how to draft a sample bylaw/operating agreement to help with establishing your LLC.

I have conducted in-depth research and consulted with lawyers and other legal experts to make the article comprehensive in addressing your needs.

Quick Summary

  • To make sample bylaws or operating agreements for an LLC, you should include all pertinent laws and conditions that apply to the business.
  • LLC bylaws function mainly to define the company's structure.
  • According to the U.S. Small Business Administration (SBA), although only a small fraction of states, about 10%, mandate having an LLC Operating Agreement, drafting one can greatly minimize future complications.
  • I always tell my clients that the Secretary of State does not require you to submit an operating agreement during LLC formation.


How to Create Sample Bylaws For LLC?

To create sample bylaws for an LLC, follow these steps:

  • Set a meeting with all the members of the LLC
  • Create rules for the entity covering management, finance, and other company matters
  • Finalize the process by writing the specific bylaws of the LLC
  • Conduct meetings to create changes or amendments

Among the many things that bylaws usually contain are:

  • Percentage of company member ownership and allocation of profits or losses
  • Voting rights
  • Withdrawal or transfer options
  • Member death or disability
  • Adding or dismissing members
  • Dissolution process
  • Articles of Organization

From my experience, limited liability companies (LLCs) in many states are required to establish an LLC operating agreement, which serves as a framework for their operation.

What Are Bylaws For LLC?

Two lawyers explaining how to make bylaws for an llc

For our company, the bylaws provide a framework of how the company is to be run. They include information regarding management, day-to-day operations, and financial aspects.

LLC Operating agreements are legal contracts that define the business procedures of your LLC [1].

An operating agreement is required if you use an entity classification system that doesn't follow the typical IRS or state setup for partnerships and limited liability companies (LLCs).

When drafting bylaws for an LLC, it's crucial to consider not only the present needs of your business but also its future growth and potential challenges. - Jon Morgan, CEO and Editor-in-Chief of Venture Smarter 

LLC Operating Agreement vs. Corporate Bylaws

Shaking hands with another person

LLC operating agreements are similar to bylaws, but there are a few key differences.

Bylaws are typically more detailed, outlining such things as the company's operational procedures, while an operating agreement is more likely to deal with more general issues, such as the purpose of the LLC and the rights and responsibilities of the LLC members.

Bylaws usually apply and are specific to only one company, while an operating agreement format can apply to multiple LLCs.

Based on insights from the U.S. Small Business Administration (SBA), 20-30% of LLCs lack a formal operating agreement, which often incorporates bylaws.

As per the state's default LLC rules, a sample of an LLC operating agreement is not required, while bylaws are required.

According to the U.S. Small Business Administration (SBA), although only a small fraction of states, about 10%, mandate having an LLC Operating Agreement, drafting one can greatly minimize future complications and safeguard the limited liability status of your business.

LLC Operating Agreement Benefits

Drawing from my professional experience, a well-drafted sample LLC operating agreement can help avoid any financial and management misunderstandings among members and provide a roadmap for managers on how to run the company.

1. Protecting Your Limited Liability Status

One of the key benefits of forming a limited liability company is that its members are protected from the company's debts and liabilities.

This limited liability status can be lost if the company does not have an LLC operating agreement in place.

2. Defining Financial and Management Structure

From personal experience. operating agreements can also help define the financial and management structure of the company.

This can help ensure that everyone understands their role and responsibilities within the organization.

3. Overriding State Default Rules

Operating agreements can also override state default rules, which can help customize the company's operation to fit your specific needs.

FAQs

Is Ownership Division in an LLC Included in the Bylaws?

The ownership division in an LLC is included in the bylaws. The actual percentage of the ownership interest may vary depending on the specific Articles of Organization of a given company.

What Are the Essential Elements of an Operating Agreement?

The essential elements of a free LLC Operating Agreement template include the following:

  • A limited liability company (LLC) name
  • The ownership structure of the LLC
  • The members
  • The registered agent's name and address
  • The purpose of the LLC
  • The state in which it is formed
  • The LLC's principal place of business
  • The duration of the LLC, if not perpetual

How Much Does the LLC Operating Agreement Cost?

The cost of an LLC operating agreement will depend on the complexity of the document and the amount of legal assistance needed to draft it. There is no set price for an operating agreement, whether it's for a single-member LLC or a multi-member LLC.


References:

  1. https://www.rocketlawyer.com/business-and-contracts/starting-a-business/form-an-llc/legal-guide/llc-operating-agreement-requirements-by-state

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