Operating Agreement LLC Massachusetts

A Massachusetts Limited Liability Company Operating Agreement is an internal contract that explains how the business will operate. It outlines decision making, ownership, and the rights and duties of each Member. Without a written agreement, the LLC may appear to function like a sole proprietorship or a partnership, which can increase the risk of personal liability for the owner or owners.

What Is an Operating Agreement

An Operating Agreement is a contract among the Members that governs ownership, management, and internal procedures. It explains how membership interests are calculated, how profits and losses are allocated, and how the company may be dissolved. Once all Members sign the document, it becomes legally binding.

Is an Operating Agreement Required in Massachusetts

Massachusetts law does not require an LLC to have a written Operating Agreement. The Massachusetts Limited Liability Company Act allows an LLC to operate without one, but the company will then be controlled by the default rules in state law.

Massachusetts still requires certain information to be kept in writing, such as Members’ contributions, rights to distributions, and dissolution rules.

A written Operating Agreement helps show that the LLC is separate from its owner or owners. This is important for single member LLCs because it supports the limited liability shield. Many banks and lenders also ask for a written agreement when opening accounts or reviewing loan applications.

Key Components of a Massachusetts LLC Operating Agreement

Below are the main topics most agreements cover. Members may include any lawful provision that fits the needs of their business.

Foundational Business Details

• Effective date
• Name of the LLC that complies with state rules
• Business purpose
• Duration of the LLC
• Registered agent for service of process
• Statement that the company is formed as an LLC
• Federal tax treatment, such as sole proprietorship, partnership, S corporation, or C corporation. Massachusetts is not a community property state. A Massachusetts LLC cannot elect Qualified Joint Venture status.

Members, Ownership, and Management

• Membership interests, listed as percentages or units
• A statement confirming that Members are shielded from personal liability for the LLC’s debts and obligations
• Rules for compensation or reimbursement of Members
• Voting rights and approval thresholds
• Management structure

Member managed: All Members may run daily operations and may bind the LLC.

Manager managed: One or more Managers handle daily operations. Members take a passive role but vote on major matters.

Capital and Financial Structure

• Initial capital contributions from each Member
• Rules for additional contributions and consequences for failing to contribute
• Allocation of profits and losses among Members

General Provisions and Dissolution

• Rules for withdrawal or transfer of ownership
• Restrictions on transfers and notice requirements
• Dissolution rules, including what happens upon death, retirement, or resignation of a Member
• Record keeping, indemnification, dispute resolution, severability, and a statement that the agreement is the entire agreement

The Operating Agreement is an internal record. Once signed, it is binding.

Filing and Record Keeping Requirements

The Operating Agreement is not filed with the Secretary of the Commonwealth of Massachusetts or with any other state agency. Members must keep the agreement with company records, and each Member should have a copy.

The LLC must still file a Certificate of Organization and complete required filings, including the annual report, through the Corporations Division.