Louisiana LLC Operating Agreement
A Louisiana operating agreement is the legal document that cements your LLC’s rules and processes into writing. It’s a legally binding contract that determines how your LLC will handle “big-picture” issues, including the voting process, membership interest, allocation of profits and losses, and dissolution.
While the Louisiana Articles of Organization are filed with the state, your operating agreement is an internal document kept on file at your business. Even though you may never have to show your operating agreement to a government official, it’s an essential document for your Louisiana LLC. Unless you’re fluent in legalese, you might find the prospect of crafting an operating agreement intimidating. That’s why Northwest offers free, attorney-drafted Louisiana operating agreement templates to get you started.
Why should a Louisiana LLC have a operating agreement?
A Louisiana LLC should have an operating agreement because a company cannot act for itself. In order to operate, LLCs require real humans (and other entities) to carry out company operations.
1. An operating agreement is required to open a business bank account.
Most banks in Louisiana require LLCs to provide a written operating agreement when opening a business bank account. And using a business bank account is crucial for keeping your business and personal finances separate—something you need to do to maintain limited liability status.
2. An operating agreement can help reinforce your limited liability status.
To keep from being held personally liable for damages against the business, LLC owners must be able to show that their LLC is a legally separate entity. Adhering to the rules and procedures in your operating agreement is one way to do this. If your LLC is ever served with a lawsuit, having a strong operating agreement will make your attorney’s job easier.
3. An operating agreement can help prevent misunderstandings.
Even when all parties mean well, sometimes communication just breaks down. At times when your members can’t agree on what to do next, it will help to consult your operating agreement, which plans for a range of important situations.
4. An operating agreement can override Louisiana’s default laws.
Without an operating agreement, your LLC will be governed by Louisiana’s default LLC laws. Your LLC might have unique needs that these default laws don’t account for. With a custom operating agreement, you can better control your LLC.
Louisiana Case Law
We asked our lawyers for an example of how an operating agreement can make or break your LLC. Here’s what they said.*
“Consider the case of Bourbon Investments, LLC, where the failure to adopt an operating agreement meant that the LLC operations (including the transfer of membership interests) were governed by the statute’s default rules. Assuming good faith on all parties involved, confusion emerged regarding the ability of member’s to transfer/assign membership to other members (in contrast to unrelated third parties). Such confusion could have been avoided, or at least privately resolved among the members, had the members adopted an operating agreement which clarified or modified the statutory rules.
“Because no such operating agreement was adopted, the members had to seek assistance from the courts in the form of extensive and expensive litigation to determine the efficacy of the attempted membership transfers. Had the members taken the time to plan ahead, discuss potential pain points, and distill their understandings into a written agreement, valuable resources could have been preserved for purposes that were more commercially fulfilling than resolving an internal dispute among the members. For these reasons (and more), a reasonably prudent business owner would (and should) adopt and maintain an operating agreement.”
What is included in a Louisiana LLC Operating Agreement?
Your operating agreement provides the blueprint for how your Louisiana LLC functions internally. Technically you’re free to include anything that’s not against Louisiana law in your operating agreement, but every strong operating agreement will cover at least these topics:
- Membership interest
- Voting rights and decision-making powers
- Initial contributions
- Profits, losses, and distributions
- Bookkeeping procedures
Is an operating agreement required in Louisiana?
There is no Louisiana law requiring LLCs to adopt an operating agreement. However, a written operating agreement is usually required to open a company bank account, and it can help you reinforce your limited liability status if you ever face a lawsuit.
Do I have to file my operating agreement in Louisiana?
No, you aren’t required to file your operating agreement with the Louisiana Secretary of State. However, Louisiana Revised Statute § 12:1319 states that if you have a written operating agreement, it must be kept on file at your LLC’s registered office.
Does a single-member LLC need an operating agreement?
Yes! You might think that since you’ll always agree with yourself, there’s no reason to get an operating agreement in writing. But single-member LLCs still need to show an operating agreement to open a business bank account. And if you’re ever sued, a written operating agreement helps you demonstrate that your LLC is a distinct legal entity with limited liability status. Without an operating agreement, there’s a chance that a court could view your single-member LLC as a sole proprietorship—and you risk being held personally liable for damages.
*This is informational commentary, not advice. This information is intended strictly for informational purposes and does not constitute legal advice or a substitute for legal counsel. This information is not intended to create, nor does your receipt, viewing, or use of it constitute, an attorney-client relationship. More information is available in our Terms of Service.