Even single member LLC’s should have an operating agreement. The importance of an operating agreement seems obvious when unrelated parties are partners in an LLC; but the need seems less apparent when there is one member or if the member of the LLC is a husband and wife or a joint trust. Having an operating agreement is a tangible item that demonstrates the intent that the LLC be treated as a legitimate business. A creditor attempting to pierce, or reverse pierce, the veil of the LLC is likely to use the lack of an operating agreement to try to prevail in litigation.
The operating agreement should also be updated from time to time to reflect changes in ownership or management. For instance, in estate planning matters we often have clients assign their ownership of their LLC to a revocable trust or a Nevada On-Shore Trust (domestic asset protection trust). The resulting change in ownership or a change in the named manager should be updated in the operating agreement with an amendment to the operating agreement or a restatement of the operating agreement.
Attorney Jason C. Walker