Georgia law does not require an LLC to have an operating agreement. Banks, lenders, members, and courts effectively do.

Without one, your LLC is governed entirely by the default rules of the Georgia Limited Liability Company Act (O.C.G.A. § 14-11-100 et seq.). Those defaults work — until they don’t. When a member dies, divorces, withdraws, sues, or wants to sell, the default rules deliver outcomes that the original members rarely anticipated and rarely want.

A well-drafted operating agreement is the single most important piece of paper in a Georgia LLC. Below is the twelve-section checklist I work through with every formation client.

1. Formation, name, and offices

The opening section confirms the LLC’s existence and identifies it:

  • Legal name (matching the Articles of Organization filed with GA SOS)
  • Date of formation
  • Principal office address
  • Registered office and registered agent
  • Statement that the LLC is governed by the Georgia LLC Act

This section is mostly recitation, but it matters: amendments to the registered agent or office trigger updates here, and the legal name must match the SOS filing exactly.

2. Members and ownership percentages

Identify each member by name and address. State each member’s percentage interest in the LLC, broken into:

  • Capital interest — share of the LLC’s net asset value
  • Profits interest — share of profits and losses (often the same as capital, but can differ)
  • Voting interest — share of votes (often the same as capital, but can differ)

Distinguishing between these three is what gives LLCs their flexibility advantage over corporations. A member can contribute 50% of the capital, take 60% of the profits, and hold 40% of the votes — if the operating agreement says so. Without explicit language, all three default to equal proportions in line with capital contributions.

3. Capital contributions

State exactly what each member is contributing:

  • Cash amounts and payment dates
  • Services rendered (with valuation)
  • Property contributed (with valuation, basis, and tax treatment)
  • IP assignments (with documentation reference)

For property and IP contributions, attach documentation of the transfer — a bill of sale for property, an assignment for IP. The operating agreement should reference these as exhibits, not just list them.

Address future capital calls: when can additional contributions be required? What’s the consequence of failing to contribute? Dilution, loss of voting rights, default interest, or some combination?

4. Allocations of profits and losses

Allocations are how the LLC’s tax items are reported on each member’s K-1. They are not the same as cash distributions.

The default rule under Georgia law allocates profits and losses in proportion to capital contributions. The operating agreement can override that — and often should, particularly when:

  • One member contributes services rather than cash (special allocations of profits to that member)
  • The LLC will have substantial depreciation deductions (allocate to high-tax-bracket members)
  • A “carry” structure is contemplated (founders take a larger profits share after capital is returned)

Allocations have to comply with IRC § 704(b) substantial economic effect rules. This is one section of the operating agreement that should not be drafted from a generic template.

5. Distributions

Distributions are actual cash (or property) flowing from the LLC to members. The operating agreement should address:

  • Tax distributions — minimum cash distributed to members each year to cover their tax liability on allocated income (typically 35–45% of allocated profits)
  • Discretionary distributions — when can the manager declare them? Unanimous consent, majority, or single-manager authority?
  • Mandatory distributions — any required distributions on certain events (sale of major assets, end of fiscal year)
  • Liquidation distributions — order of priority on dissolution
  • Allocation vs. distribution mismatch — members get K-1 income whether or not cash flows; the operating agreement should require tax distributions to avoid the “phantom income” trap

6. Management structure

Georgia LLCs can be member-managed (all members participate in management) or manager-managed (designated manager(s), who may or may not be members, run the LLC).

Specify clearly:

  • Which model applies
  • Who the managers are (if manager-managed)
  • The scope of manager authority
  • What requires member approval (typically major decisions: sale of substantially all assets, mergers, admission of new members, distributions outside the regular course, taking on debt above a threshold, amending the operating agreement)
  • Removal of managers — for cause, without cause, vote thresholds

7. Voting rights and procedures

Default voting in Georgia LLCs is per-capita (one member, one vote). Most operating agreements override this to allocate voting in proportion to membership interest.

Specify:

  • The voting standard (per capita or per percentage interest)
  • Quorum requirements
  • Approval thresholds for ordinary matters (majority) and major matters (supermajority or unanimous)
  • Tie-breaking procedures — critical in two-member LLCs to avoid deadlock
  • Whether written consents in lieu of meetings are permitted

8. Member meetings (or absence thereof)

Georgia law does not require annual meetings of LLC members. The operating agreement should state whether meetings are required at all, and if so:

  • Frequency (annual, quarterly, ad hoc)
  • Notice requirements
  • Quorum
  • Permissible meeting formats (in person, telephone, video)
  • Whether written action by consent is allowed in place of meetings

For closely-held LLCs with active members, written consents in lieu of meetings are usually sufficient.

9. Transfer restrictions and right of first refusal

Without explicit transfer restrictions, a member can sell or assign their economic interest to a third party (though under O.C.G.A. § 14-11-503, the assignee does not become a member without consent). Most operating agreements impose stricter rules:

  • Right of first refusal (ROFR) — if a member wants to sell, the LLC and remaining members get the first right to buy at the same price
  • Permitted transfers — transfers to family, trusts, or affiliates without ROFR
  • Prohibited transfers — transfers to competitors, persons with conflicts of interest
  • Drag-along — if members holding a supermajority want to sell, they can require minority members to participate in the sale on the same terms
  • Tag-along — if a member is selling, minority members can require the buyer to purchase their interests on the same terms

In multi-member LLCs, this section often gets the most attention during a sale or dispute. It deserves attention during drafting.

10. Buyout triggers

The operating agreement should address what happens when a member exits — voluntarily or involuntarily. The standard triggers:

  • Death — purchase by LLC or remaining members; valuation method
  • Disability — definition of disability; trigger window; valuation
  • Divorce — to keep an ex-spouse from becoming a member; often handled through a marital property waiver and a buyout right
  • Bankruptcy — to keep a bankruptcy trustee from disrupting the LLC
  • Voluntary withdrawal — typically a defined process with notice and a valuation method
  • Termination of employment — for member-employees, exit on departure
  • Dispute (no-fault) buyout — a “shotgun” or “Russian roulette” mechanism that lets members force a buy/sell when the relationship breaks

For each trigger, specify the valuation method (formula, appraisal, fixed price, book value, or some combination), the payment terms (lump sum or installments with interest), and any restrictive covenants (non-compete, non-solicit) on the departing member.

11. Dissolution

Specify:

  • Events that trigger dissolution (member vote, sale of substantially all assets, expiration of a term, bankruptcy of the LLC)
  • The winding-up process
  • Order of distribution on dissolution (creditors first, then members per their interests)
  • Whether the LLC can continue after a member’s withdrawal or death (Georgia default is generally yes; the operating agreement should confirm)

12. Amendments and governing law

The closing section addresses:

  • Procedure for amending the operating agreement (vote threshold, written form)
  • Governing law (Georgia, in nearly all cases for a Georgia LLC)
  • Severability
  • Notices (how members are notified of LLC matters)
  • Counterparts and electronic signatures
  • Integration (the operating agreement is the entire agreement among members)

Where DIY templates fall short

The free templates available online cover sections 1, 2, 6, and parts of 7. They typically gloss over:

  • Special allocations under IRC § 704(b)
  • Tax distribution requirements
  • Buyout triggers and valuation methods
  • Drag-along and tag-along rights
  • Capital call mechanics
  • IP and property contribution documentation
  • Death-and-divorce protections

For a single-member LLC with no investment plans, a template fills the gap. For a multi-member LLC or any LLC that may receive outside capital, a template is a starting point — not a finished operating agreement.

Single-member LLC: yes, you still need one

A single-member LLC does not have “members” to negotiate with, but it still benefits from a written operating agreement. A bank will ask for one when opening the business account. A lender will ask for one before extending credit. A future partner will ask for one when joining. An IRS auditor may ask for one when reviewing your tax classification election. And when you sell or transfer the LLC, the operating agreement is part of the documentation that validates what you’re selling.

A single-member operating agreement is short — five to ten pages — but having one in writing keeps the LLC respected as a separate entity, which supports the limited liability protection you formed it for.

Bottom line

The operating agreement is where the business decisions of the LLC get written down. It’s not paperwork — it’s the contract among the people who own the company. Time spent here is time you don’t spend in litigation later.

Schedule a Consultation

Related reading:

Citations

  • O.C.G.A. § 14-11-100 et seq. (Georgia LLC Act)
  • O.C.G.A. § 14-11-503 (Effect of assignment of LLC interest)
  • IRC § 704(b) (Substantial economic effect)
  • IRC § 731 (Distributions)
  • Treas. Reg. § 1.704-1(b) (Substantial economic effect regulations)