Operating Agreement LLC Pennsylvania

A Pennsylvania Limited Liability Company (LLC) Operating Agreement is a written internal contract among the LLC members. It outlines the company’s ownership structure, management framework, and operating rules. This document serves as the internal governance guide that helps clarify member rights and responsibilities and reinforces the LLC’s status as a separate legal entity.

Is a Pennsylvania Operating Agreement Required?

No. Pennsylvania does not require LLCs to adopt an Operating Agreement. Under Section 8816 of the Pennsylvania Uniform Limited Liability Company Act of 2016, an LLC may have an agreement, but it is not mandatory.

If no agreement exists, the LLC must follow Pennsylvania’s default rules under 15 Pa.C.S. Section 8811 et seq. These defaults include member managed governance and voting that corresponds to ownership interests. A written Operating Agreement lets members override these statutory defaults and sets clearer procedures for internal operations.

Financial institutions, lenders, auditors, and courts may request a copy of the Operating Agreement to verify ownership, authority, and internal governance.

Why a Pennsylvania Operating Agreement Matters

Protects limited liability A written Operating Agreement helps show that the LLC operates separately from its members. This supports limited liability and helps reduce the risk of veil piercing, especially for single member LLCs.

Builds credibility Banks, lenders, and business partners often require the Operating Agreement before opening accounts or extending credit.

Reduces disputes The agreement outlines rules for voting, management, capital withdrawals, and profit allocation, which helps avoid disagreements among members.

Allows customized management Without an agreement, Pennsylvania imposes default management rules. A written Operating Agreement lets members customize governance, choose manager managed structures, and establish procedures not addressed in statute.

Key Provisions to Include

A complete Pennsylvania Operating Agreement typically includes the following provisions:

• Basic Company Details: Includes the LLC name, business purpose, duration, effective date, and federal tax classification.
• Registered Agent: The name and address of the Pennsylvania Registered Office or Commercial Registered Office Provider.
• Member Information: Names, addresses, and membership interest percentages of all members.
• Capital Contributions: Initial cash, property, or other contributions made by each member, consistent with 15 Pa.C.S. § 8842.
• Management Structure: Specifies whether the LLC is member-managed or manager-managed.
• Profit and Loss Allocation: Details how profits and losses will be distributed among members.
• Tax Election: Federal tax selection (disregarded entity, partnership, S corporation, or C corporation). Pennsylvania does not allow Qualified Joint Venture taxation.
• Voting Procedures: Outlines voting power, required thresholds for decisions, and quorum requirements.
• Transfers of Interest: Rules governing how members may be added, removed, or transfer their ownership interests.
• Records and Bookkeeping: Procedures for maintaining company records and required documentation.
• Compensation: Terms explaining compensation for members or managers, if applicable.
• Dissolution: Events that trigger winding up and guidelines for distributing remaining assets.
• Amendments: Procedures for modifying the Operating Agreement. Under 15 Pa.C.S. § 8816(c), unanimous consent is required unless the agreement specifies otherwise.

Management Options for Pennsylvania LLCs

Member managed (default)

All members take part in daily operations and may bind the LLC. Voting rights correspond to membership interests.

Manager managed

Members designate one or more managers to run daily operations. Managers can bind the LLC, while members retain authority over major decisions such as amending the agreement or admitting new members.

Creating and Maintaining the Pennsylvania LLC Operating Agreement

Drafting and signing

Members may draft the agreement themselves or hire legal assistance. Signatures are recommended but not required. Notarization is optional.

Recordkeeping

The Operating Agreement is an internal document and is not filed with the Pennsylvania Department of State. LLCs should store a copy with company records because banks, auditors, or courts may request it.

Amending the agreement

Members must follow the amendment procedure specified in the document. If an amendment changes information filed with the state, such as management structure, the LLC must update its Certificate of Organization.