Operating Agreement LLC Maryland

A Maryland Limited Liability Company Operating Agreement is a legal document that explains how the company is owned and managed. It functions like corporate bylaws and creates a contract among the Members. The Operating Agreement governs internal activities, while the LLC itself is formed by filing with the state.

Legal Requirements and Importance in Maryland

Maryland does not require an LLC to adopt an Operating Agreement. Section 4A-402 of the Maryland LLC Act confirms that the document is optional. A written agreement is still recommended because it provides structure and reduces uncertainty.

A written Operating Agreement also:

• Defines internal operations and ownership
• Prevents Maryland’s default rules in the Corporations and Associations Code from controlling internal issues
• Helps show separation between Members and the company
• Documents profit distribution, voting rights, and management roles
• Serves as proof of authority for banks and third parties

Both single-member and multi-member LLCs should keep an Operating Agreement with business records.

Key Elements of a Maryland LLC Operating Agreement

A complete agreement often includes the items listed below.

Basic information: LLC name, effective date, purpose, duration, and Registered Agent information.

Ownership and interests: Names of all Members and their membership interests. These interests are usually listed as percentages or units.

Capital contributions and accounts: Cash, property, or services provided by each Member. The agreement may require capital accounts. Single-member LLCs may be exempt from certain tax account rules.

Tax treatment: Federal tax classification as a sole proprietorship, partnership, S corporation, or C corporation. Maryland is not a community property state, so Qualified Joint Venture status is not available. S corporation status must be elected with the IRS.

Management and voting rights: Whether the LLC is member managed or manager managed. Voting procedures, officer roles, and the scope of management authority.

Types of Maryland LLC Operating Agreements

Member managed: Members handle daily operations and may bind the company. Voting power usually follows ownership interest.

Manager managed: Managers oversee operations and may bind the company. Members act as owners and vote only on major issues.

Governing Law and Filing Rules

The Operating Agreement is controlled by Maryland law. It is an internal document and is not filed with the Maryland State Department of Assessments and Taxation or any other agency. No filing fee applies. Members should keep a signed copy with company records.

LLCs must also file a Beneficial Ownership Information Report with FinCEN within 90 days of receiving notice of formation or registration.

Execution and Validity

Notarization is not required. The agreement becomes effective once all Members sign it.