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Swyft Filings is committed to providing accurate, reliable information to help you make informed decisions for your business. That's why our content is written and edited by professional editors, writers, and subject matter experts. Learn more about how Swyft Filings works, our editorial team and standards, what our customers think of us, and more on our trust page.
Forming a limited liability company in North Carolina comes with a checklist of requirements you must fulfill before your LLC can take off. But before you can finish your business formation, you'll also need to establish a North Carolina operating agreement.
Unlike other requirements, such as assigning a registered agent, filing your Articles of Organization, and getting your Employer Identification Number (EIN), North Carolina's state law doesn't force business owners to create operating agreements. Still, whether you're a small business or a large enterprise in North Carolina, you'll benefit from creating an operating agreement for your LLC.
Key Takeaways
An LLC operating agreement is a legal document that determines the business structure of your LLC in North Carolina.
North Carolina LLCs aren’t required to draft an operating agreement by state laws, but your small business will still greatly benefit from one.
Creating an operating agreement for your North Carolina LLC can be challenging, so help from a professional filing service like Swyft Filings can speed up the process.
Don’t be forced to operate under default state guidelines that don’t fit your business. Shield your assets and set your own rules for your LLC with a proper Operating Agreement.
What Is an LLC Operating Agreement?
An LLC operating agreement is a legal document that decides the ownership structure and the roles of each member of the LLC.[1] It also includes your LLC's regulations, provisions, and rules for operating within North Carolina.
Overall, it allows a clearer understanding of each member's responsibilities and prevents any confusion when it comes to these aspects:
Capital contributions
Management structure
Voting rights
Meeting scheduling and holding
Profits and losses
Distribution of profits
Buyout and buy-sell rules
Modifications of the operating agreement
Membership changes
Liquidation of the LLC
Putting these on paper allows you to manage your business and prevent ambiguity in various situations.
State Requirements
As mentioned, North Carolina doesn't require LLCs to have an operating agreement. However, it is still strongly recommended.
According to Chapter 57D of the North Carolina Limited Liability Company Act, the operating agreement can be created as a written operating agreement, expressed orally or implied.[2]
Suppose your North Carolina LLC only has one ownership interest, such as a single-member LLC, and doesn't have an operating agreement. In that case, any document or record decided by the interest owner will serve as the operating agreement.
Note that stipulations of the operating agreement can't go against certain public policies or be illegal but can override state defaults.
LLC Operating Agreement Benefits
There are a few key benefits of creating an operating agreement for your North Carolina LLC:
Protects an LLC’s limited liability status by providing a clear definition of your business as an LLC
Prevents internal disputes and ensures all members act in good faith by solving issues quickly and painlessly
Adds legitimacy to your business, and some financial institutions will be more open to doing business with you if you present them with a well-made operating agreement
Who Needs an Operating Agreement?
Although it isn't required by North Carolina state law, any business can create an operating agreement. Whether you plan on running a single-member LLC, multi-member LLC, or other business structures like an S corp, you'll benefit from creating an operating agreement.
Regardless of your business type, size, and location in North Carolina, you'll have to get all the members' signatures and file the operating agreement at your LLC's primary place of business.
Drafting Your North Carolina LLC Operating Agreement
There's no universal operating agreement template that fits all businesses. Even if you find one online, you must edit it. But each company has different needs and requirements, regardless of its operating state. That's why you should draft the operating agreement from scratch and customize it to match everything your business requires.
You can do it independently, as the process doesn't require a business attorney. But you must ensure that it complies with state and federal laws. In addition, drafting your North Carolina LLC operating agreement has several steps you need to fulfill. Without going through them all, your operating agreement won't protect your business operations.
The following sections will describe each step of the process accurately to ensure a smooth and streamlined formation of your North Carolina LLC operating agreement.
Step 1: Provide Business Information
The first step of your operating agreement drafting process is providing basic information about your business that complies with the information from your Articles of Organization.
This information includes the official name of your North Carolina business, which must be unique and distinguishable from all the business entity names in North Carolina.[3] Your operating agreement must also include your business's location and address, industry type, and purpose.
You should also include information about your registered office and registered agent with whom your company will regularly update and maintain business records.
Step 2: List LLC Members
The next step is listing all the members involved in forming your business. This is necessary regardless of whether your North Carolina business is single- or multi-member. However, this requires more than just writing down the names of each member.
The operating agreement must state each member's clear obligations and roles within the company. Knowing how the members contribute to the running and growth of the business will give everyone peace of mind. The members will also clearly understand what's in their power and how involved they are in the company's affairs.
Apart from their names and roles, you also must include the membership interest in members' ownership percentages. That allows everyone to know each other’s share in the company.
Step 3: Decide Member-Managed vs Manager-Managed
Deciding on the management plan is one of the most vital aspects of your North Carolina business. You have two types, and creating an operating agreement for both differs.
Manager-managed LLCs can have passive investors who aren't part of the business structure but carry out the business operations. A manager is elected to oversee how LLC operates and reports to the members. On the other hand, the owners of member-managed LLCs are responsible for day-to-day business operations.
Like many small businesses nationwide, the default type for LLCs in North Carolina is a member-managed business type. If you want your business to be manager-managed, clearly state that in your operating agreement and outline how the manager is elected.
Step 4: Layout Administrative Operations
Administrative operations in your operating agreement might encapsulate its most vital aspects. They deal with tax clarifications, profits and losses, voting rights, annual reports, liquidation, and other company affairs.
Each section must be transparent and explicit to ensure that your business operates without difficulties.
Step 5: Add and Remove LLC Members
If a member leaves, the company may need to elect new members. Membership adjustments are also frequent with company growth. If a member leaves or another joins, this document outlines what happens to the existing ownership structure, such as whether the previous member's shares are bought out or distributed.
Therefore, your operating agreements must have a section explaining how the company deals with this change, mainly to avoid surprises and prevent unpleasant situations with the existing members of your North Carolina LLC.
Create Your Operating Agreement Through a Filing Service
Forming your own LLC in North Carolina can be a new and exciting experience. There are plenty of resources like this one to make your business launch smooth and straightforward.
However, legal paperwork is one aspect that many new small business owners would rather skip. If that's the case with you, worry not. Swyft Filings is here to help you with every step of your North Carolina LLC formation, including drafting your operating agreement.
Whether you're just starting your LLC formation or have already obtained everything but your operating agreement draft, it costs only $35 to get an operating agreement completely tailored to your business's needs. Just provide some information about your North Carolina business, wait for us to prepare an attorney-approved template, and review it online with secure access. Try Swyft Filings today and get the job done within minutes.
Set Your Own Rules: An operating agreement is your company’s founding document. Govern your business by your own guidelines, not the state’s.
Resolve Disputes: Set a binding agreement about the fundamentals of your business, covering ownership, rights, and responsibilities.
Protect Your LLC Status: Put a barrier between your personal assets and business liabilities.
FAQs
Is an LLC operating agreement required in North Carolina?
North Carolina doesn't obligate its LLCs to file an operating agreement. However, as a business owner in North Carolina, you should make it to establish a set of rules members of the LLC need to follow.
How does an LLC operating agreement help protect my assets?
An LLC operating agreement protects your assets in multiple ways. It keeps your personal assets safe by reinforcing your company's status as an LLC and ensuring it's a legal entity separate from its members. In addition, by obtaining signatures from all the members of your company, you ensure that you all know the rules and your responsibilities within the company.
Who needs access to an operating agreement once it's drafted?
An operating agreement is an internal document, meaning only you and your members can access it. However, for purposes such as bookkeeping, lawsuits, ownership changes, and financial inspection, other parties might need access to your operating agreement to provide legal advice.
How do I edit information on an operating agreement if membership changes?
You must draft a new document if your North Carolina operating agreement needs editing. Then, it must go through the same steps as the first document.
Modifying your operating agreement is required when there are changes in ownership interest or business structure. You should also change it if you need to make the requirements more specific, fix any issues, or if the agreement needs to comply with new state laws or other agencies.
What other legal documents do I need to draft for my North Carolina LLC?
Apart from the operating agreement, your North Carolina LLC needs Articles of Organization, EIN, annual reports, and tax registration forms. You might also need specific permits and certificates depending on the business you plan on running.
Bibliography
U.S. Small Business Administration. "Basic Information About Operating Agreements." Accessed June 20, 2023.
North Carolina General Assembly. "North Carolina Limited Liability Company Act." Accessed June 20, 2023.
North Carolina Secretary of State. "Selecting a Name." Accessed June 20, 2023.
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