Montana LLC Operating Agreement — What to Include

An operating agreement is the contract among the members of an LLC that governs how the company is owned and run. It is the LLC equivalent of a corporation's bylaws and shareholder agreement rolled into one. Montana does not require you to file it with the Secretary of State, and it never appears in any public record — it is a private document kept in your company records.

Montana does not require one, but the defaults will govern without it

Here is the key point: whether or not you write an operating agreement, your LLC will be governed by rules. If you write one, those rules are the ones you chose. If you do not, Montana's default statutory rules under the Montana Limited Liability Company Act fill every gap — how profits are divided, how members vote, what happens when someone wants out. Those defaults are one-size-fits-all and frequently do not match what the members actually intended. Writing an operating agreement is how you replace generic defaults with terms that fit your business.

Why single-member LLCs need one too

It is a common misconception that a solo owner does not need an operating agreement. In fact, for a single-member LLC the agreement does important work: it documents that the LLC is a genuine, separate entity — something courts look at when someone tries to pierce the liability shield and reach the owner personally. It also spells out succession if the owner dies or becomes incapacitated, and most banks ask to see it when opening a business account. A single-member operating agreement is short, but skipping it weakens exactly the protection the LLC exists to provide.

The financial heart of an operating agreement defines who owns the company, what they put in, and how money flows out. Getting these terms explicit prevents most of the disputes that tear multi-member LLCs apart.

Ownership and membership interests

List each member and their ownership percentage (often called a membership interest or membership units). This is the foundation everything else builds on. Be precise — ambiguity about who owns what is the single most common source of member conflict.

Capital contributions

Record what each member contributed to get the LLC started — cash, equipment, property, or services — and the value assigned to each contribution. Then address the harder question: are members obligated to contribute more in the future if the company needs capital, and what happens if a member cannot or will not? Spelling this out up front avoids a crisis later.

Profit and loss allocation

Define how profits and losses are allocated among members. It often tracks ownership percentages, but it does not have to — members can agree to a different split. Whatever you decide, put it in writing so no one is surprised at tax time.

Distributions

Allocation of profit on paper is not the same as cash in a member's pocket. Set the rules for distributions: when cash is distributed, how the amount is decided, and the order of priority. Clarify whether members can expect regular distributions or whether the company will retain earnings to reinvest.

Beyond the money, an operating agreement sets out how the company is actually run day to day and how decisions get made when members disagree.

Management structure

State whether the LLC is member-managed (the owners run the business directly) or manager-managed (designated managers, who may or may not be members, handle operations while other members stay passive). This choice is also declared in your Articles of Organization, but the operating agreement is where you define what each role can actually do.

Authority and limits

Spell out what managers or managing members can do without a full vote — sign contracts up to a certain size, hire staff, take on ordinary debt — and what requires broader approval. Reserving major decisions (selling the business, taking on large debt, admitting a new member, amending the agreement) for a member vote protects everyone from unilateral moves.

Voting rights

Define how votes are counted. Are votes weighted by ownership percentage, or does each member get one vote regardless of stake? What threshold is needed — a simple majority, a supermajority, or unanimity — for different kinds of decisions? Setting these thresholds prevents deadlock and surprise.

Meetings and records

Montana does not impose the rigid meeting requirements that corporations face, but your agreement can set whatever cadence and notice rules you want for member meetings, and specify how decisions are recorded. Even a light structure here creates a paper trail that supports the separateness of the entity.

The provisions people skip are the ones about leaving — and those are exactly the ones that matter most when a relationship sours, a member dies, or the business ends. A good operating agreement plans for exits before anyone needs to use the plan.

Transfer restrictions

Decide what happens when a member wants to sell or transfer their interest. Most multi-member LLCs include a right of first refusal (existing members get first crack at buying) and require approval before an outside party can become a member. Without these, a member could sell their stake to someone the others never agreed to work with.

Buy-sell provisions

Address the hard events: a member wants out, dies, becomes disabled, divorces, or goes bankrupt. A buy-sell provision sets how the departing member's interest is valued and how the remaining members can buy it. Agreeing on a valuation method in advance — while everyone is still on good terms — avoids bitter fights later.

Adding and removing members

Set the process and vote required to admit a new member or, where permitted, to remove one. Clarify how a new member's contribution and ownership percentage are determined.

Dissolution

Define the circumstances under which the LLC winds down and the order in which assets are distributed after debts are paid. This dovetails with Montana's dissolution process — a clear internal agreement makes an eventual wind-up far smoother.

Amendments

Finally, specify how the operating agreement itself can be amended, and by what vote. Businesses evolve; the agreement should have a built-in way to evolve with them.