Operating Agreement LLC Washington

A Washington Limited Liability Company (LLC) Operating Agreement is an internal document that outlines how the LLC will be governed. It defines the ownership structure, management authority, and operational rules that members will follow. Some refer to it as a Washington Operating Agreement or Washington LLC Company Agreement. Regardless of the name, it serves as the primary internal governance document for the LLC.

Many LLCs adopt an Operating Agreement during formation, while others create one later as the business develops. The document is not filed with the state and is maintained internally.

Is a Washington Operating Agreement Required?

Washington does not require LLCs to adopt an Operating Agreement. Under the Washington Limited Liability Company Act, an Operating Agreement may be written, oral, or implied. Even though it is not mandatory, a written agreement is strongly recommended. Without one, the LLC will default to the statutory rules in RCW 25.15, which may not reflect the members intended structure or preferred operating methods.

Why a Washington Operating Agreement Matters

Maintains limited liability protection

A written Operating Agreement helps demonstrate that the business operates independently of its owners. Courts may evaluate how well an LLC follows internal governance when determining whether to uphold limited liability protections. A written agreement is especially beneficial for single member LLCs.

Establishes internal rules and expectations

Washington’s statutes only control where the Operating Agreement is silent. By preparing a written agreement, members can define their own procedures for decision making, management, financial distributions, and dispute resolution.

Required by financial institutions and third parties

Banks, lenders, and accountants often request an Operating Agreement to verify ownership and confirm who has authority to act on behalf of the LLC. The document provides clarity regarding internal structure and management authority.

Key Provisions to Include in a Washington Operating Agreement

A Washington Operating Agreement typically includes the following:

Basic Company Details

• LLC name
• Business purpose
• Principal office
• Duration
• Federal tax classification. Washington requires LLC names to include Limited Liability Company, LLC, or an accepted abbreviation.

Registered Agent and Office

• Identifies the Washington registered agent responsible for receiving legal notices
• Any change must be filed with the Washington Secretary of State

Member Information

• Names and addresses of all members
• Ownership percentages
• Initial capital contributions

Capital Contributions

• Cash, property, or services provided by each member
• Statement that members are not automatically entitled to interest on contributions

Management Structure

• Whether the LLC is member managed or manager managed
• Description of managerial authority, duties, and decision-making processes

Profit and Loss Allocation

• How profits and losses will be allocated among members
• How and when distributions will be made
• Confirmation that distributions may only be made when the LLC can satisfy its obligations

Tax Election

• Federal tax classification chosen by the LLC
• Note that certain classifications require additional IRS filings

Voting Procedures

• Voting rights
• Quorum rules
• Decision making thresholds Many Washington LLCs base voting on ownership percentage unless stated otherwise in the agreement.

Transfers of Interest

• Rules for adding or removing members
• Procedures for transfers due to withdrawal, death, or expulsion
• Buyout arrangements

Records and Bookkeeping

• How financial records, meeting notes, and tax filings will be maintained
• Washington’s Annual Renewal requirement with the Secretary of State

Compensation

• How members, managers, or officers will be compensated if payment is provided \

Dissolution

• Events that may trigger dissolution
• Steps for winding up business affairs
• Filing a Certificate of Dissolution with the Washington Secretary of State

Amendments

• How the Operating Agreement may be amended: Most Washington LLCs require written member approval for changes.

Management Options for Washington LLCs

Member Managed

In a member managed LLC, members oversee daily operations and may bind the company through their actions. This format is common for smaller businesses where owners are actively involved. Voting rights typically follow ownership percentages unless the agreement provides otherwise.

Manager Managed

In a manager managed LLC, members appoint one or more managers who handle day-to-day operations. Managers may be members or nonmembers. Members retain authority over major decisions but do not manage daily affairs unless assigned specific responsibilities.

Creating and Maintaining the Washington Operating Agreement

Drafting and Signing

The Operating Agreement becomes effective once adopted by the members. Washington permits written, oral, and implied agreements, but a written document is strongly recommended. The agreement is not filed with the Secretary of State.

Recordkeeping

The Operating Agreement should be stored with the LLC’s permanent records. Each member should keep a copy for reference. Washington requires LLCs to file an Annual Renewal, so maintaining complete internal records is important.

Amending the Agreement

If the members need to update the Operating Agreement, they should prepare a revised version, review it collectively, and sign it based on the amendment procedures outlined in the agreement. If the amendment affects information on file with the state, such as the registered agent or principal office, the LLC must file the appropriate update with the Secretary of State.