Operating Agreement LLC New York

A Limited Liability Company (LLC) in New York is a business structure that offers limited liability like a corporation and flexible management similar to a partnership. The company comes into existence once the Articles of Organization are filed with the New York State Department of State (DOS). Internal rules are set in a separate document called the Operating Agreement (OA).

Mandatory Requirement for New York LLCs

State law requires every LLC to adopt a written Operating Agreement. Section 417 of the New York Limited Liability Company Law states that members must enter into a written OA.

Timing and Adoption

The OA must be adopted before filing the Articles of Organization, at the time of filing, or within 90 days after the filing. New York law does not describe penalties for failing to adopt an OA. Section 1102 of the Limited Liability Company Law appears to require the LLC to keep a copy of the OA and any later amendments with the company’s records.

Internal Document, Not Filed with the State

The OA is kept within the company’s records and is not filed with the DOS or any other state office. There is no fee for this document. The Articles of Organization create the LLC as a legal entity, while the OA outlines how the company will be run. The agreement becomes binding when signed by the members, and no government review is needed.

Benefits of a Written Operating Agreement

A written OA may offer several practical advantages even though it is already required by law.

• It helps show that the LLC stands apart from its owners, which may support limited liability.
• It allows the LLC to override default state rules such as equal profit sharing.
• It clarifies rights and duties, which may reduce conflict among members.
• It can serve as proof of ownership because member names do not appear in the Articles of Organization.
• Banks, lenders, and title companies often require the OA before doing business with the LLC.

Single-member LLCs may also want an OA because it helps show the company is separate from the owner.

Topics to Cover in an Operating Agreement

A New York OA may address topics such as formation details (LLC name, effective date, purpose, and duration), ownership structure and percentage interests, capital contributions, and how profits and losses will be shared. It may also explain whether the LLC is member-managed or manager-managed, how voting rights are tied to ownership interests, and how the company will be taxed at the federal and state level.

The OA may include rules for transferring ownership, buyout procedures, and how the company will close. State law does not allow provisions that shield managers who act with intent to cause harm or in bad faith.

Government Offices Connected to New York LLCs

Several offices are involved in the formation and operation of New York LLCs. The New York State Department of State (DOS) receives Articles of Organization, handles name checks, and answers filing questions. The Internal Revenue Service (IRS) issues the EIN and provides federal tax guidance. The New York State Department of Taxation and Finance (DTF) oversees state tax matters, including the member-count-based fee. The Department of Education, Office of the Professions, handles rules for Professional Service LLCs. The Department of Labor (DOL) and the Workers’ Compensation Board (WCB) provide information on employment requirements.

Preparing an Operating Agreement

An attorney can draft the OA, but one is not required. A template may be adjusted to fit the LLC’s needs.