Your LLC Is Missing Its Most Important Document

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1. Feature: Your LLC Is Missing Its Most Important Document (5 min read)

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You filed your LLC, opened a bank account, and maybe even bought a domain name and logo. You’ve got limited liability protection, tax flexibility, and a vision. But if you’re running a single-member LLC (SMLLC) and you don’t have an operating agreement in place, you’re skipping one of the most important tools in your legal toolbox.

Let’s clear something up: an operating agreement isn’t just for big companies or multi-owner startups. It’s for you—the solo business owner, the freelancer turned founder, the one-person ecommerce brand. Here’s why.

What Is an Operating Agreement?

Think of it as your LLC’s playbook. It spells out:

• Who owns the company (you)

• What happens if you die or become incapacitated

• How profits are handled

• Whether someone can step into your shoes and keep the business running

In multi-member LLCs, an operating agreement is like a business prenup. In a single-member LLC, it’s a living will.

You might assume you don’t need one. After all, it’s just you. But this document is more than a formality—it’s a shield that protects your business from chaos and your loved ones from confusion.

Why It Matters, Even When It’s Just You

1. Estate Protection

If you die without an operating agreement, your LLC interest becomes part of your estate. That can mean probate court. That means delays. That means a judge—who doesn’t know your business—deciding what happens next.

But with a clear agreement, you can name a successor, such as a trusted family member or the trustee of your revocable living trust. In some states, you can even use a transfer-on-death clause to skip probate altogether.

2. Bank and Lender Requirements

Many banks and lenders ask for a copy of your operating agreement when you apply for financing or open an account. If you don’t have one, you might look less serious—even if you’ve got six figures in revenue.

3. Credibility and Clarity

Having an operating agreement shows you run your business professionally. And if you ever bring on a partner, investor, or buyer, you’ve already laid the foundation.

What Should Be in Your Operating Agreement?

You don’t need a 30-page legal tome. But you do need clear, legally sound language. Here are a few key sections to include:

Formation

This identifies the LLC’s name, formation state, and effective date.

Sole Member

It should state clearly that you’re the only member and owner. This affects how profits are distributed (they go entirely to you) and how decisions are made (you have full authority).

Successor Provisions

If you die, who takes over? Your operating agreement can specify a successor or direct the interest to your revocable trust. This keeps the LLC from dissolving prematurely.

Digital Asset Protection

Websites, social media accounts, and email lists are often overlooked. Your operating agreement should confirm that these are owned by the LLC and outline how access is managed and transferred if something happens to you.

Tax Status

Most SMLLCs are taxed as disregarded entities by default. But your agreement can clarify this or document any alternative tax election (like an S election).

The Signature Quirk That Trips People Up

If you download our template and see that it has two signature blocks—one for you as the sole member and one for the company—you might wonder: “Am I signing this twice? Isn’t that redundant?”

It’s not.

You’re signing once as the business owner (you, the individual) and once on behalf of the company (you, wearing your ‘LLC hat’). Why does this matter? Because an LLC is a separate legal entity—even if you’re the only person involved.

Signing both ways shows you respect the legal separation between you and your company, which is one of the core reasons to form an LLC in the first place. That distinction is part of what protects your personal assets if the business is ever sued.

What Happens If You Don’t Have One?

Here’s the hard truth: if you don’t have an operating agreement, your business is governed by your state’s default LLC laws. Those laws may:

• Automatically dissolve your business upon your death

• Restrict how your interest can be transferred

• Impose recordkeeping and consent requirements you didn’t anticipate

Worse, those default rules don’t always reflect your goals. They weren’t written with your business in mind. An operating agreement lets you write your own rules.

How to Get One in Place Today

If you don’t have an operating agreement yet, here’s what to do:

1. Use a Professional Template
   We’ve prepared a state-agnostic SMLLC operating agreement designed for real-world solo owners. It’s clean, comprehensive, and includes critical sections like successor planning and digital asset protection.

2. Customize It Thoughtfully
   Fill in your company name, your name, and your capital contribution. Most SMLLC owners simply list their startup funding or initial bank deposit.

3. Sign It—Twice
   Once as the member. Once on behalf of the company. Store a signed copy with your records and give a copy to your lawyer or estate planner.

4. Consider Adding a Revocable Trust
   If you have a trust or are working with an estate planner, consider naming your trust—not you—as the LLC member. This avoids probate entirely and keeps your business operating seamlessly. Banks and credit card issuers won’t mind.

The Bottom Line

Just because you're the only one running your LLC doesn't mean you don't need structure. A well-drafted operating agreement is one of the simplest ways to protect your business, your family, and your future.

It’s not legal red tape. It’s peace of mind.

And if something happens to you, it’s the difference between your business surviving—or disappearing.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!