Introduction: LLC Governance Demystified
If you’re forming or managing a Limited Liability Company (LLC), one of the first questions that might come to mind is:
“Do LLCs have bylaws like corporations?”
The short answer: No, LLCs do not have corporate bylaws in the traditional sense. Instead, they use a different type of internal document called an Operating Agreement, which serves a similar purpose but is tailored for the LLC structure.
But that simple answer doesn’t tell the whole story.
In this in-depth guide, we’ll walk you through:
- What bylaws are and how they apply to corporations
- Why LLCs don’t use bylaws (and what they use instead)
- What an operating agreement is and why your LLC needs one
- Key components of a strong operating agreement
- How to set up your LLC’s internal rules the right way
Whether you’re a solo entrepreneur launching your first LLC or you’re part of a multi-member startup, this article will help you understand and implement proper internal governance for your company.
Chapter 1: What Are Corporate Bylaws?
Before we can understand why LLCs don’t use bylaws, we need to take a closer look at what bylaws actually are.
1.1 Definition of Bylaws
Bylaws are formal internal rules adopted by corporations. They outline how the corporation is governed, how meetings are held, how votes are cast, and what powers directors and officers hold.
1.2 Common Bylaw Provisions:
- Procedures for board meetings
- Roles and duties of officers (e.g., CEO, CFO, Secretary)
- Voting rights of shareholders
- Methods for amending bylaws
- Officer elections and term limits
1.3 Why Bylaws Matter for Corporations
Corporate bylaws are typically required by law in most U.S. states. Without them, a corporation would lack clear procedures for governance, and shareholders or officers could run into disputes or compliance issues.
Bylaws serve to:
- Define the corporate structure
- Clarify roles and responsibilities
- Reduce confusion or conflict among stakeholders
- Demonstrate legitimacy to investors, banks, and courts
Chapter 2: Do LLCs Have Bylaws?
2.1 The Short Answer: No
LLCs do not have bylaws. Bylaws are a corporate concept. Instead, LLCs operate based on a flexible internal document known as an Operating Agreement.
2.2 Why LLCs Are Different
Unlike corporations, LLCs are meant to be flexible and less rigid in their structure. They don’t have a board of directors or corporate officers unless the members decide to include them.
Instead of bylaws, LLCs are typically managed according to their Operating Agreement, which can be customized to fit the needs of the members.
Here’s a quick comparison:
| Corporation | LLC |
|---|---|
| Bylaws | Operating Agreement |
| Shareholders | Members |
| Directors | Managers or Members |
| Officers | Optional Roles |
Chapter 3: What Is an LLC Operating Agreement?
An Operating Agreement is the foundational internal document for an LLC. It serves as a legal contract between the members and outlines how the LLC will operate.
3.1 Purpose of an Operating Agreement
- Define the roles of members and managers
- Allocate ownership and capital contributions
- Establish profit-sharing rules
- Outline voting rights and decision-making procedures
- Set guidelines for adding/removing members
- Create rules for dissolving the company
3.2 Is It Legally Required?
That depends on your state.
| State | Is Operating Agreement Required? |
| California | Yes |
| New York | Yes |
| Missouri | Yes |
| Delaware | No, but recommended |
| Wyoming | No, but recommended |
Even if your state doesn’t mandate an operating agreement, having one is highly recommended for all LLCs.
Chapter 4: Why Every LLC Needs an Operating Agreement
4.1 Prevent Internal Disputes
Disagreements are inevitable in business. An operating agreement helps by clearly stating:
- Who makes what decisions
- How disagreements are resolved
- What happens if a member wants to leave
4.2 Legal Protection and Liability Shield
Operating agreements help preserve the limited liability protection LLCs are known for. Courts may “pierce the corporate veil” if your LLC doesn’t follow its own rules or lacks formal documentation.
4.3 Bank Accounts, EINs, and Loans
Many banks will not allow you to open a business account without an operating agreement. Lenders and investors may also require it as a sign of professionalism.
4.4 Override Default State Laws
Each state has its own set of default rules that apply if you don’t create an operating agreement. These rules may not reflect your intended structure or preferences.
Chapter 5: What Should Be Included in an Operating Agreement?
While every LLC is different, most operating agreements should include the following sections:
5.1 Company Information
- LLC name and principal address
- Formation date and state
- Purpose of the business
5.2 Member Details
- Names and addresses of each member
- Ownership percentages
- Capital contributions
5.3 Management Structure
- Member-managed or manager-managed?
- Roles and responsibilities
- Voting procedures
5.4 Profits and Losses
- Allocation of profits and losses
- Distribution schedule
- Tax treatment (e.g., default or S-Corp election)
5.5 Changes in Membership
- Admission of new members
- Transfer of ownership
- Death, disability, or withdrawal of a member
5.6 Meetings and Voting
- Frequency and type of meetings
- Notice requirements
- Quorum and voting thresholds
5.7 Dispute Resolution
- Mediation or arbitration clauses
- Jurisdiction and legal venue
5.8 Dissolution and Exit
- Triggers for dissolving the LLC
- Distribution of remaining assets
- Winding up procedures
Chapter 6: Special Considerations for Single-Member LLCs
Many entrepreneurs form single-member LLCs (SMLLCs) to operate solo businesses.
Even in these cases, having an operating agreement is crucial.
6.1 Why It Still Matters
- Proves the LLC is separate from the owner
- Helps avoid commingling of funds
- Required by banks and tax agencies
- May be requested in audits or legal disputes
6.2 What to Include
For SMLLCs, the operating agreement can be shorter but should still cover:
- Name and address of owner
- Tax classification (e.g., disregarded entity or S-Corp)
- Banking and accounting policies
- Rules for dissolution
Chapter 7: What If You Choose S-Corp Tax Status?
Choosing to have your LLC taxed as an S-Corporation does not mean you need corporate bylaws.
7.1 S-Corp: A Tax Designation, Not a Structure
When you elect S-Corp taxation (via IRS Form 2553), your LLC remains legally an LLC — just with a different tax setup.
7.2 Governance Still Follows Your Operating Agreement
Even with an S-Corp tax election, your internal rules should still be based on your LLC’s operating agreement, not corporate bylaws.
Chapter 8: What Happens If You Don’t Have an Operating Agreement?
Let’s say you form an LLC but never create an operating agreement. What could go wrong?
8.1 You’ll Default to State Law
Your LLC will be governed by the state’s default rules, which may not align with how you want to operate.
8.2 Increased Risk of Disputes
Without a written agreement, disagreements can quickly spiral into costly legal battles.
8.3 Possible Loss of Liability Protection
Courts may view the LLC as a mere “alter ego” of its owners if you don’t follow formal procedures.
8.4 Limited Access to Services
Banks, investors, and lenders often request a copy of your operating agreement before doing business with your LLC.
Chapter 9: Tips for Drafting Your Operating Agreement
9.1 Use a Template — But Customize It
Start with a standard operating agreement template, but tailor it to fit your business’s specific needs.
9.2 Review with a Legal Professional
An attorney can help ensure that your agreement complies with state laws and truly protects your interests.
9.3 Update It Over Time
Your LLC may evolve. Update the agreement when:
- New members join
- Ownership changes
- Tax elections shift
9.4 Store It Securely
Keep both digital and physical copies of the agreement. Ensure all members have access.
Conclusion: LLCs Don’t Have Bylaws — But They Do Have Rules
If you’ve been wondering whether LLCs need bylaws, here’s the final word:
No, they don’t.
Instead, every LLC should have a well-drafted Operating Agreement — a vital document that governs how the company runs, how decisions are made, and how members interact.
Whether your LLC has one owner or five, an operating agreement offers structure, protection, and clarity.
Need help creating one?
At FormLLC, we specialize in LLC formation services, including:
- Customized Operating Agreements
- EIN (Employer Identification Number) filing
- BOI (Beneficial Ownership Information) report assistance
- Registered Agent Services
- U.S. Business Address and Mail Forwarding
Start your U.S. LLC with confidence — backed by expert guidance and full documentation.
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