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North Carolina LLC Operating Agreement

Your North Carolina LLC operating agreement is a legal document that establishes rules for how your LLC will handle procedures like voting, allocating profits and losses, management, and even—should it ever come to this—dissolution.

An operating agreement is an internal document, but that doesn’t make it any less important than documents filed with the state. In fact, adopting a strong operating agreement is essential. That’s why we at Northwest offer a range of free, attorney-drafted North Carolina operating agreement templates to help suit your business needs.

Why should a North Carolina LLC have an operating agreement?

A North Carolina 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.

While NC Gen Stat § 57D-2-30 (2019) lays the ground work for operating agreements in North Carolina, it doesn’t explicitly state that North Carolina LLCs are required to have an operating agreement. However, you will need an operating agreement to maintain your LLC. Here’s why:

1. Your operating agreement proves you own your LLC.

Your North Carolina Articles of Organization don’t require the names of any members. This is great for maintaining privacy, but it doesn’t help you show proof of ownership. This is where your operating agreement comes in.

Because it includes the names of all members, you can use your operating agreement to show that you own your business. This is necessary when it comes to opening a business bank account and renting property, as banks and landlords typically ask to see an LLC’s operating agreement.

2. An operating agreement can help reinforce your limited liability status.

To benefit from limited liability status, business owners must show that their LLC is its own legal entity separate from its members. One way to do this is to open a separate bank account for your LLC. Another way is to create (and follow) an operating agreement.

3. An operating agreement can help head off misunderstandings.

Unfortunately, people disagree and sometimes misinterpret information—there’s no way around it. But with an operating agreement with established rules and procedures for your company, you can prevent these issues from flaring up into bigger problems.

4. An operating agreement can override North Carolina’s default laws.

If you don’t have an operating agreement, your LLC will automatically be governed by North Carolina’s default laws. The problem is that these statutes might not work well with your company. Adopting an operating agreement helps ensure that you’re able to run your LLC (according to the law) the way you see fit.

North Carolina 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 HCW Retirement & Financial Services, LLC, where a lack of clarity resulted in litigation among the members pertaining to the language of the operating agreement. Because the members failed to clearly set out the process in the operating agreement for how disputes would be resolved, the members had to expend valuable resources for over 2 years within the court system, only to have the dispute kicked all the way from the state supreme court back to the trial court to ultimately be ‘remanded’ (sent) to arbitration.

Had the members clearly expressed their intent and understanding in their operating agreement early on, then the valuable resources spent on litigating the various interpretations of the operating agreement could have been preserved for more fulfilling purposes. For these reasons (and more), a reasonably prudent business owner would (and should) adopt and maintain an operating agreement.”

What is included in a North Carolina operating agreement?

According to NC Gen Stat § 57D-1-03, your operating agreement can be “written, oral, or implied.” However, an intangible agreement won’t holdup in court. A strong, written operating agreement is essential, and should include information about:

  • Transfer of membership interest
  • Voting rights and decision-making powers
  • Initial contributions
  • Profits, losses, and distributions
  • Management
  • Compensation
  • Bookkeeping procedures
  • Dissolution

North Carolina LLC Operating Agreement Template

Below are Northwest’s free, attorney-drafted operating agreement templates, customized for North Carolina LLCs. Choose the one that works best for your business.

FAQs

Is an operating agreement required in North Carolina?

No, North Carolina’s statutes don’t explicitly state that LLCs are required to have an operating agreement. However, you’ll need an operating agreement for several important tasks, including opening a business bank account.

Do I have to file my operating agreement in North Carolina?

No. Your operating agreement is an internal document, which means you’ll keep it on file with your own LLC records.

Does a single-member LLC need an operating agreement?

Actually, yes. Even though it sounds bizarre to form an agreement with yourself, you’ll need an operating agreement for several important tasks, like opening a business bank account and—perhaps most importantly—maintaining limited liability.

*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.

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