What must owners do in an LLC with two or more members?

In a Limited Liability Company (LLC) with two or more members, it is essential for owners to sign a contract similar to a partnership agreement, often referred to as an operating agreement. This document serves several crucial functions, including outlining the management structure, defining the rights and responsibilities of each member, and detailing how profits and losses will be distributed. By having this agreement in place, members can prevent misunderstandings and provide a clear framework for decision-making within the company.

An operating agreement not only helps to establish the internal workings of the LLC but also provides legal protection for members by clarifying the terms of their partnership. This is particularly important in a multi-member LLC, as it helps each member understand their role and ensures a smoother operation of the company.

While filing additional paperwork with the state may be necessary for certain filings or amendments, the requirement for an operating agreement is a more foundational necessity to effectively manage an LLC with multiple members. Establishing bylaws or forming a board of directors is more common in corporations and is not a standard requirement for LLCs.