Operating Agreement LLC Montana

A Montana Limited Liability Company Operating Agreement is a written contract among the Members. It explains the LLC’s ownership structure, identifies who owns the company, and outlines how the company is managed. The agreement serves as the internal rules for running the business. It is created under the Montana Limited Liability Company Act in the Montana Code Annotated, Title 35, Chapter 8.

Is an Operating Agreement Required in Montana

Section 35-8-109 of the Montana Limited Liability Company Act states that an Operating Agreement is not required for an LLC to conduct business. Members may adopt an agreement, and it does not need to be in writing to govern relations among Members, Managers, and the company.

A written Operating Agreement is still recommended for both single member and multi member LLCs. It provides several benefits. It shows that the LLC operates as a separate legal entity. It helps Members open business bank accounts and apply for financing because many institutions request it. Clear written rules also help prevent disputes. It allows Members to customize internal governance because, without an agreement, the default rules in the Montana LLC Code apply.

The Articles of Organization must be filed with the Montana Secretary of State to form the LLC. The Operating Agreement is an internal record. It is not filed with the Secretary of State or any other government agency. It becomes legally binding once signed by the Members and does not need notarization.

Management Structures and Voting Rights

Montana LLCs may use one of two management structures. In a member managed LLC, all Members can bind the company and handle daily operations. In a manager managed LLC, designated Managers run daily operations and can bind the company. Members in these companies take a passive role and cannot bind the LLC.

Voting rules are set in the Operating Agreement. Voting power is typically based on ownership percentage. In a manager managed LLC, certain actions, such as admitting or removing a Member, require Member approval rather than Manager approval.

Essential Content of the Operating Agreement

A complete Montana Operating Agreement usually includes the items below.

Basic Company Details

• LLC name, effective date, purpose, and duration
• Montana Registered Agent
• Principal place of business

Financial and Ownership Details

• List of Members and their ownership percentages
• Initial capital contributions
• Federal tax classification, such as sole proprietorship, partnership, S corporation, or C corporation
• Allocation of profits and losses and distribution rules
• Bookkeeping procedures and Member capital accounts

Management and Legal Provisions

• Voting rights and decision making procedures
• Management structure and compensation
• Membership transfer procedures and admission of new Members
• Indemnification provisions
• Dissolution and winding up rules

The Montana Limited Liability Company Act limits certain terms. An Operating Agreement cannot unreasonably restrict access to company records. It cannot remove the duty of loyalty or the duty of good faith. It also cannot reduce the duty of care beyond what the law allows. A Montana LLC may elect S corporation tax treatment if it qualifies. Members may designate a tax matters partner for IRS purposes.