Connecticut LLC Operating Agreement: Drafting Checklist

Starting an LLC in Connecticut is a multi-step journey. Business owners must start off by filing their Certificate of Organization[1] with the Secretary of State when starting an LLC in Connecticut. After paying the filing fee, this document officially registers your limited liability company.

However, that isn’t the only thing you’ll need for your LLC. Business owners should also create an LLC operating agreement. This legal document outlines your Connecticut limited liability company’s rules, regulations, and business strategies while protecting you from personal liability and governance by default state law.

Business owners can draft an operating agreement upon business formation or before registering with the Secretary of State. Doing so will solidify decision-making standards and save you time while running your LLC.

Key Takeaways

• An LLC operating agreement clearly defines your business strategy and essential day-to-day operations.

• Using a Connecticut operating agreement protects your business from falling under state laws outlined in the Connecticut Uniform Limited Liability Company Act.

• You should use a template to make the process easier when creating your operating agreement. Hiring an official filing service can also save you time and effort.

What Is an LLC Operating Agreement?

An LLC operating agreement is a private document that clearly defines a business plan for your LLC. This includes company affairs, ownership structure, daily operations, members, and management structures. It allows you to customize your company policies to suit your business needs.

All relevant members should agree on the contents before finalizing the document. Once signed, it becomes legally binding. Business owners will also benefit from professional legal advice for effective drafting.

State Requirements

Connecticut operating agreements are not required by state law. However, your business still benefits from drafting one. 

Drafting these internal documents will entail collecting relevant information regarding your business, such as:

• Your LLC name. When starting a business, owners need a distinguishable company name for the business to be registered with the Connecticut Secretary of State[2].

• Your LLC’s business purpose. Precisely define your industry and how you intend to do business.

• Your LLC members’ names. You should account for each member involved in creating your LLC within the document.

LLC Operating Agreement Benefits

While not compulsory by state law, having an LLC operating agreement still benefits most businesses. Some of the main advantages include:

• Protecting your personal assets. When forming an operating agreement, your LLC becomes a distinguishable legal entity. That means you won’t have personal liability for any losses or debts your LLC suffers.

• Customizing your LLC’s policies. Without an operating agreement, your business will fall under the Connecticut Uniform Limited Liability Company Act[3]. This method implies checking default state rules for essential functions such as decision-making. By drafting an operating agreement, you can set particular rules for LLCs.

• Organizing your business. Business owners clearly define and make all company tasks official with an operating agreement. Doing so helps standardize affairs for crucial management decisions.

Who Needs an Operating Agreement?

Now that you know the benefits of drafting an operating agreement, you might wonder which business formations need one. Some examples include:

• Any LLC company in Connecticut. All LLCs within Connecticut can benefit from a company operating agreement. This includes small businesses, large companies, multi-member LLCs, and single-member LLCs.

• LLC companies in California, New York, and Missouri. According to state law, LLCSs in these three states must create an operating agreement upon registration.

However, some business formations, typically with different abbreviations, won’t need an operating agreement. These include:

• Incorporations. It’s not that these companies don’t benefit from a business plan; it’s just that they use bylaws instead of a typical operating agreement.

• Sole Proprietorships. With this business formation, the company and founder are considered one entity. As such, sole proprietorships consist of only one person. However, it is common for this business entity to utilize other documentation for a business strategy.

Drafting Your Connecticut LLC Operating Agreement

Once you’re set on drafting an operating agreement for your LLC, you’ll need to collect the necessary information. Here are some basic things you’ll need ready for structuring an excellent operating agreement:

• Compliance with the Connecticut Secretary of State through your Certificate of Organization. Registering your business will give you official information on your limited liability status. You’ll need to use these points while drafting your operating agreement.

• An LLC operating agreement template. Preparing any document for your business can seem overwhelming. However, a template can help you structure and organize all your information while saving you time. You can choose to make one from scratch. However, this can considerably complicate the final document.

• Basic LLC information. As you form your business, consider collecting all your business information in one file. You’ll need details like management structure, business name, and place of business.

• A registered agent. A registered agent will gather and receive legal documents for your LLC. While an operating agreement is private, providing your registered agent with a copy could be helpful in case of legal complications.

Step 1: Provide Business Information

The fundamentals of an operating agreement involve basic LLC information. This will help clearly define your entity and give you a helpful place to check for your official information.

Some key information points include:

• The company name

• The place of business

• Your Employer Identification Number (EIN)

• Service of process

• The business bank account

After filing with the Secretary of State, you’ll likely have some of this information ready to go. 

Step 2: List LLC Members

Defining members is a crucial part of your LLC and your operating agreement. When drafting your internal document, ensure you include all members. Once listed, begin assigning them member responsibilities. For this part, you’ll need to verbally discuss roles with your members before clearly defining them in written form.

As we’ll see later, members are responsible for certain administrative operations like voting rights, membership interests, and ownership percentages. As you add them, the basic structure of your LLC will begin to take form. Here, you can clearly define yourself as a multi-member LLC or a single-member LLC.

Stating your members is also essential because it gives them considerable legal protection from personal liability. The LLC becomes a distinct entity, so members won’t be held responsible for debt and loss.

Step 3: Decide Member-managed vs. Manager-managed

Once you’ve listed the individual members of your business, it’s time to move on to the company’s management. It’s a crucial aspect of the decision-making process, and it helps avoid confusion and inefficiencies during daily business tasks. This is yet another segment that requires complete cohesion between all parties. There are two main management structures to choose from. They include:

• A member-managed LLC. In this structure, members will actively engage in daily operations and decision-making. It allows members to come together and vote for management decisions as official agents of the LLC.

• A manager-managed LLC. Sometimes, members won’t be available to deliver effective choices and votes. Instead, they’ll leave some decision-making processes up to hired managers. This is typical with larger LLCs, where it’s difficult for members to oversee all aspects of conducting business.

A single-member LLC falls into the member-managed structure by default, but you can still hire a manager if beneficial. If you plan on adding more members to your LLC, you’ll have to make an amendment to reflect new members in the future.

Step 4: Layout Administrative Operations

Administrative operations are both the heart of your business and your operating agreement. These are technical yet fundamental processes that determine your day-to-day as an LLC. 

Discuss your approach with members beforehand.

With unanimous agreement, move on to drafting each administrative process in detail. Some of these processes include:

• Voting Rights. Each member will have specific voting rights for making important decisions in a member-managed structure. Members can share these voting rights equally or base the distribution on capital contributions.

• Business bank account. Opening an active bank account will be necessary for tax purposes such as income tax and other transactions while conducting business.

• Allocations. You’ll have a wide range of financial outcomes when starting a business. You should have a clearly defined distribution method amongst members for debt, losses, and profit.

• Capital contributions. When you start an LLC, members might want to pitch in with various capital contributions. Include them within the operating agreement and ensure they’re reflected in other administrative operations, such as voting rights.

Before finalizing the document, you can ask if the relevant parties have any special or additional requests.

Step 5: Add and Remove LLC Members

Changing members within an LLC can be complicated to reflect in an operating agreement. The easiest way is to make amendments, while some business owners might prefer to start their operating agreement over again.

Complications don’t arise from changing members but from the effects this has on most administrative operations. If a member leaves, define the implications of member contributions, membership interests, and voting rights. Once you make the relevant changes, your members should agree before signing and finalizing the document.

Once your operating agreement is complete, you should store it within your core business records. This will ensure that relevant parties can easily read the agreement whenever necessary. There’s no need to notarize this document or file it with the secretary of state as it is considered private.

Create Your Operating Agreement Through a Filing Service

Registering your LLC and drafting an operating agreement can be time-consuming and inconvenient. It requires communication with the Secretary of State and forming official documents. This process can also lead to unforeseen complications if you don’t have the proper documents in order.

Swyft Filings is a professional filing service that can help you draft your operating agreement and register your LLC online in just minutes. Our service ensures you have a compliant document for conducting business in the state of Connecticut.

By using Swyft Filings, you can obtain this vital document while you focus on running your business. 

FAQs

Is an LLC Operating Agreement required in Connecticut?

No, state law does not require an LLC operating agreement. However, it is still recommended as operating agreements greatly benefit businesses.

How does an LLC Operating Agreement help protect my assets?

An operating agreement protects your assets by distinguishing your LLC as a separate entity. This means you personally won’t be held accountable for any losses the business suffers.

Who needs access to this document once it’s drafted?

An LLC operating agreement is a private document. Once it’s drafted, only you, your members, and potentially a registered agent need access to it.

How do I edit information on this document if membership changes?

If membership changes, amend the operating agreement to reflect this. Remember that this can affect a wide range of administrative operations, so you’ll need to include those changes, too. The new and old members should sign the document once you make the proper amendment.

What other legal documents do I need to draft for my Connecticut LLC?

When forming your LLC, the first step is filing the Certificate of Organization with the Secretary of State. However, business owners will also need an Employer Identification Number from the IRS[4]. This is necessary for annual reports and other tax purposes.

Bibliography

1. Secretary of the State of Connecticut. “CERTIFICATE OF ORGANIZATION.” Accessed June 29, 2023.

2. Secretary of the State of Connecticut. “Registering your Business” Accessed June 29, 2023.

3. Secretary of the State of Connecticut. “CHAPTER 613a UNIFORM LIMITED LIABILITY “COMPANY ACT.” Accessed June 29, 2023.

4. Secretary of the State of Connecticut. “IRS Information.” Accessed June 29, 2023.