Oklahoma LLC Operating Agreement: Drafting Checklist

You’re starting a small business in Oklahoma and decided that a limited liability company (LLC) is right for you. You need to file several documents during your business formation process, with your Articles of Organization being the priority. Another document to consider in this process is an LLC operating agreement.

The state of Oklahoma doesn’t require your budding LLC to have an operating agreement. However, it’s still a good idea to create one. This article explains why and demonstrates the steps for creating the document.

Key Takeaways

• The state of Oklahoma doesn’t require your LLC to have an operating agreement to conduct business in the state.

• An LLC operating agreement reaffirms your liability protection and helps you create a management structure for your small business.

• Though operating agreements are internal company documents, they hold legal power, and all LLC members must abide by the rules in the agreement.

What Is an LLC Operating Agreement?

When you start an LLC, you’ll file your Articles of Organization to define what the business does, who runs the company, and who serves as its registered agent. However, this document doesn’t set governance rules for your LLC.

That’s where your operating agreement comes in.

An operating agreement is a legal document used for several purposes, including defining ownership stakes and outlining your processes in specific scenarios within your LLC. Though not a legal requirement, the document is helpful in the governance of this type of business entity.

State Requirements

Under Oklahoma law, you don’t have to file an operating agreement with the Oklahoma Secretary of State to create an LLC or conduct business in the state. As such, it’s like an Employer Identification Number (EIN) for a single-member business – you don’t need to have it, but there are several benefits to creating it (as outlined below).

Oklahoma law still defines what an operating agreement can be, assuming you create one. It states that the agreement governs the relationships between your LLC members, their activities, and the rights and duties of the person (or persons) you assign as your LLC manager.

It’s also worth pointing out that the Oklahoma Limited Liability Company Act governs any issues related to your LLC if you don’t have an operating agreement. Any agreement you create needs to align with these laws, though you can use the agreement to set specific procedures and rules for your business.[1]

LLC Operating Agreement Benefits

Even though you’re not legally obligated to create an operating agreement for your LLC in Oklahoma, there are several reasons to do so.

Have a Legal Document for Governance

As your LLC grows, the business entity may take on several members, each with different opinions. What happens if those opinions don’t align, resulting in a dispute between members? If you don’t have an operating agreement, you have no document to which you can refer to resolve the dispute. The result may be that you have to seek costly legal advice.

When you have an operating agreement, you can create procedures and processes that help you deal with these types of issues. All members refer to (and are bound by) the rules outlined in the document.

Outline the Roles and Responsibilities of Each Member

Every LLC owner and member in your business has responsibilities that they must meet to keep the business running. An operating agreement allows you to document those responsibilities and actions taken if the member fails to meet said duties.

For example, you can use the operating agreement to designate a member who’s responsible for filing your company’s Annual Certificate each year.[2] You can then use the document to outline the process for doing this and any punishments the member faces should they fail to submit the document.

Solidify Your Limited Liability Status

One of the main benefits of creating an LLC business entity is that it offers liability protection you don’t get in a partnership or sole proprietorship. This coverage generally extends to each member’s personal assets, meaning they don’t lose out personally if the business is sued or fined.

Your operating agreement confirms the LLC’s membership structure via a list of those members. You can refer to this list if disputes arise regarding who is and isn’t a member of your LLC. Think of the agreement as an internal document confirming who receives the protection that LLC offers.

Who Needs an Operating Agreement?

Whether you have a domestic LLC or a foreign limited liability company, no LLC is technically “required” to have an operating agreement. It isn’t a legal requirement under Oklahoma state law for LLC formation, and you can operate without an agreement, written or otherwise.

Nevertheless, Swyft Filings recommends that all Oklahoma limited liability company owners draft an operating agreement. For large LLCs with multiple members, the document ensures you don’t have to rely on state default rules when a dispute arises. Plus, you can use the agreement to outline ownership percentages and the role of each member.

Single-member LLCs, which often work similarly to a sole proprietorship in practice, also benefit from operating agreements. For instance, what happens if your business grows and you need to bring in new members? Your operating agreement can define the process you follow to prevent confusion. Bear in mind that you’re bound by the rules you create in the document, even if you have a single-member LLC.[1]

Drafting Your Oklahoma LLC Operating Agreement

Several options are available when drafting a written operating agreement, including relying on a third-party service or using an LLC operating agreement template.

Given that an Oklahoma operating agreement is an internal document, meaning you don’t have to submit it to the Oklahoma Secretary of State, you may wish to draft it yourself. These five steps show you how to create the agreement; however, working with a legal professional is still recommended because an operating agreement is a legal document.

Step 1: Provide Business Information

If you’ve already created your Articles of Organization, you’re ahead of the game regarding the first step of drafting your LLC operating agreement. You can transfer the basic business information from the Articles of Organization to your agreement.

Assuming you’re not that far into the LLC formation process, the basic information to add to your operating agreement includes:

• The name of the company

• The company’s address

• Details of your registered agent, including their registered office where they’ll receive service of process

• Basic information about what your business does and what industry it serves

Step 2: List LLC Members

With the primary business information provided, you can list all LLC members and owners. This step is vital because it confirms who works within your LLC, thus highlighting who’s entitled to the liability protection the LLC structure provides.

Details to include here are as follows:

• The names and addresses of all LLC owners and members

• The membership interest (or ownership interest) that each person on the list has

• Information about member contributions, be this monetary or labor-related

• Statements confirming that each member’s personal assets receive the protection of the LLC structure

If you have a single-member LLC, you may wonder if creating a list of members is worth it. After all, you’re the company’s sole member, so you may feel a list isn’t as necessary for you as it is for a multi-member LLC.

That’s not the case.

Listing yourself within a single-member LLC operating agreement ensures that you have a legal document highlighting the personal liability protection you receive from your LLC. It also gives you a foundational template to follow should you add new members in the future.

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

You can create a member-managed or manager-managed LLC as part of your operating agreement, as per Oklahoma state law.[3] Which option you choose depends on how much control you wish to assert in the day-to-day management of your LLC.

In a member-managed LLC, one of the LLC members is responsible for overall LLC management. This structure is often the best choice in a single-member LLC, especially if you want to maintain complete control over the business.

A manager-managed LLC differs because you bring in an independent party to handle management duties. This independent party need not have anything to do with your LLC beyond managing, making it a great choice if you want additional oversight or don’t have a member suitable for the management position.

Step 4: Lay Out Administrative Operations

With your membership list documented and management structure solidified, you can move on to defining processes and procedures for various administrative operations. This section of your operating agreement can be as extensive (or as short) as you like. Remember that any issues you don’t cover in the document defer to state law if the said issue affects your LLC.

Though there are many administrative operations you might define in your operating agreement, the below are among the most common:

• Determine who has what voting rights and under what scenarios when making decisions related to the business.

• Assign individuals responsible for essential tasks, such as managing your business bank account or dealing with income tax issues with the Internal Revenue Service (IRS).

• Ensure somebody is responsible for submitting your Annual Certificate to the Oklahoma Secretary of State each financial year.

• Document allocation and distribution processes for members based on labor or capital contributions.

• Create any operating procedures necessary for your LLC’s daily running.

Step 5: Add and Remove LLC Members

You may add new members to your LLC as your company grows, or members may decide to leave for other opportunities in the future. You can use your operating agreement to account for both possibilities to ensure chaos doesn’t reign in your business due to a membership change.

Add stipulations to the internal document that put rules in place related to the following:

• How you’ll divide a member’s voting rights and allocation if they leave

• Conditions that new members must meet to receive voting rights, distributions, and other allocations

• A process to follow should the business be involved in a buyout

• Procedures for the dissolution of the LLC

Create Your Operating Agreement Through a Filing Service

Hopefully, it’s now clear why an LLC operating agreement is such an essential document for small business owners, even those that form single-member LLCs. Though Oklahoma doesn’t require creating an operating agreement, having one means you’re prepared with a legal document to refer to when business issues arise.

At Swyft Filings, we can help you create an LLC operating agreement as part of our LLC filing service. Starting at $0 (plus state filing fees), our filing service handles everything from operating agreements to the Articles of Organization you must submit to start your business. We’ve served over 300,000 clients since 2015 and provide rapid turnarounds on complex filing issues.

If you’d like to speak to a member of the Swyft Filings team about filing for an LLC in Oklahoma, Check out our LLC filing service today.

FAQs

Is an LLC Operating Agreement required in Oklahoma?

The state of Oklahoma doesn’t require LLC owners to create operating agreements.

How does an LLC Operating Agreement help protect my assets?

LLC operating agreements confirm your LLC’s ownership and membership structure and give you a legal document to which you can refer for asset protection issues.

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

Operating agreements are internal business documents, meaning that your LLC members are usually the only people who require access. However, some financial institutions or legal professionals may ask to see the document when resolving issues on your LLC’s behalf.

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

You can stipulate the conditions that must be met to amend your operating agreement within the agreement itself. For example, you may specify that the LLC must receive a certain number of votes from members when considering the addition of a new member.

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

You must submit Articles of Organization with the Secretary of State and an Annual Certificate each year.

Bibliography

1. Justia. “2020 Oklahoma Statutes Title 18. Corporations §18-2012.2. Operating agreement of LLC.” Accessed June 6, 2023.

2. Oklahoma Secretary of State. “Other Online-Filings.” Accessed June 6, 2023.

3. Casetext. “Okla. Stat. tit. 18 § 2013.” Accessed June 6, 2023.