Short answer: Pennsylvania does not require an LLC to have a written operating agreement, and you do not file one with the state. Even so, every Pennsylvania LLC should have one. Without it, the default rules in Pennsylvania’s Uniform Limited Liability Company Act decide how your company is run, how money is shared and what happens when a member leaves, and those rules may not match what the owners agreed to.
This guide explains what a Pennsylvania LLC operating agreement is, what it should include, and why single-member LLCs need one too.
What is an LLC operating agreement?
An operating agreement is the contract among the owners (members) of an LLC. It sets out who owns what, who makes decisions, how profits and losses are shared, and how the company handles changes such as a new member, a buyout, or closing the business. It is an internal document. You keep it with your company records, not with the Pennsylvania Department of State.
Forming the LLC itself is a separate step: you file a Certificate of Organization with the Department of State, which costs $125, and then file a $7 annual report each year. Our guide to how to start an LLC in PA covers the filing, and the PA LLC cost calculator totals the fees.
Is an operating agreement required in Pennsylvania?
No. Pennsylvania law allows an operating agreement to be written, oral or implied from how the members act, and it does not require you to have a written one. But an oral or implied agreement is hard to prove when there is a disagreement, and banks, lenders and title companies often ask for a signed copy before they will open an account, make a loan or close a real estate deal.
What happens without one?
If there is no operating agreement, or it is silent on an issue, the default rules of the Pennsylvania Uniform Limited Liability Company Act apply. Some examples of how the defaults can surprise owners:
- Management. A Pennsylvania LLC is managed by its members unless the company is set up as manager-managed. If you want one person or an outside manager to run the business, put it in writing.
- Major decisions. Ordinary business decisions are generally made by a majority, but decisions outside the ordinary course can require the consent of every member.
- Distributions. The default rules for sharing distributions may not track how much each member invested. If one member put in more money, the agreement should say how profits are split.
- Leaving or dying. Without a buy-sell plan, a departing member or a deceased member’s heirs may be left holding an interest no one can easily value or buy.
What a Pennsylvania operating agreement should include
- Basic company information. The LLC’s name, principal office, purpose and the date of the Certificate of Organization.
- Members and ownership. Each member’s name, capital contribution and ownership percentage.
- Management. Whether the LLC is member-managed or manager-managed, who can sign contracts, and any spending limits.
- Voting. Which decisions need a majority and which need unanimous consent, such as selling the business, adding a member or taking on major debt.
- Profits, losses and distributions. How and when money is paid out, including distributions to cover members’ income taxes.
- Tax treatment. How the LLC is taxed, for example as a partnership, disregarded entity or S corporation.
- Additional capital. What happens if the company needs more money and whether members must contribute.
- Transfers and buy-sell terms. Limits on selling an interest to outsiders, and how an interest is valued and bought out on death, disability, divorce or retirement.
- Duties and conflicts. Any changes to members’ or managers’ duties, within what Pennsylvania law allows.
- Disputes. How deadlocks and disagreements are resolved, such as mediation or a buyout procedure.
- Dissolution. When and how the company is wound up and how assets are divided. See how to dissolve an LLC in Pennsylvania.
Single-member LLC operating agreements
A single-member LLC also benefits from an operating agreement. It helps show that the LLC is a separate business, which supports the liability protection that is the main reason to form an LLC. It can also name who takes over management if the owner dies or becomes incapacitated, so the business does not stall while an estate is opened. That ties the agreement to your estate plan.
Operating agreements for family land and mineral rights
Families in Washington County often use an LLC to hold farmland or oil and gas interests so the property stays together across generations. In that case the operating agreement does a lot of work: who signs leases and division orders, how royalty income is distributed, and whether a family member can sell their share to an outsider. See our mineral rights page for more on keeping family minerals organized.
Can I use a free template?
A template can be a starting point for a simple single-member LLC. For a company with two or more owners, outside investors, real estate or mineral interests, a template rarely covers the buy-sell, voting and tax terms that matter most when something goes wrong. Make sure any form you use is written for Pennsylvania’s current LLC law.
Frequently asked questions
Do I file my operating agreement with the state of Pennsylvania?
No. Keep the signed agreement with your company records and give copies to the members.
Can I change my operating agreement later?
Yes. The agreement should state how it can be amended, often by a vote of all members. Put every amendment in writing and have the members sign it.
Does a single-member LLC need an operating agreement in PA?
It is not required, but it is recommended. Banks often ask for one, and it supports the separation between you and your business.
When should I sign the operating agreement?
Ideally when the LLC is formed, before members contribute money or property. Agreeing on the terms early is far easier than negotiating them during a dispute.
Starting a business or bringing in a partner? Kostrub Law Firm drafts operating agreements and handles business formation for owners in Washington County and the Pittsburgh area. Call (304) 982-1586.