Is an Operating Agreement Required in California?

California Corporations Code Section 17701.10 explicitly allows LLC members to adopt a written operating agreement — but does not mandate one. However, while California law doesn’t require an operating agreement, practically speaking you cannot operate a California LLC without one for the following reasons:

• Banks require it. Almost every bank that opens business accounts for LLCs will ask for your operating agreement. No OA = no business bank account.
• Investors require it. Any sophisticated investor or partner will want to review your operating agreement before giving you money or signing a deal.
• Without one, California’s default rules govern everything. And California’s default rules may not reflect what you actually want for your business.
• It proves your LLC is a real, separate entity. Without an OA, courts may be more willing to pierce the corporate veil and hold you personally liable for LLC debts.

What Must a California LLC Operating Agreement Include?

California law gives LLC members significant flexibility in what to include in an operating agreement. At minimum, a solid California LLC operating agreement should cover:

Basic Information

• LLC name and state of formation
• Principal place of business
• Formation date and term (most are “perpetual”)
• Purpose of the LLC
• Names and addresses of all members

Ownership and Capital

• Each member’s ownership percentage (membership interest)
• Each member’s initial capital contribution
• Rules for additional capital contributions
• How and when members can withdraw capital

Management Structure

• Member-managed vs manager-managed — who has authority to make decisions and bind the LLC to contracts
• Voting rights and procedures
• What decisions require unanimous consent vs majority vote
• Compensation for managers and members

Profit and Loss

• How profits and losses are allocated among members
• When and how distributions are made
• Tax treatment elections (sole prop, partnership, S-Corp, C-Corp)

Membership Changes

• How new members can be admitted
• What happens when a member wants to leave
• Right of first refusal provisions
• What happens upon a member’s death, disability, or bankruptcy
• Buy-sell provisions (especially critical for multi-member LLCs)

Dissolution

• What triggers dissolution of the LLC
• How assets are distributed upon dissolution
• Winding-up procedures

Single Member LLC Operating Agreement vs Multi-Member

Operating agreements differ significantly based on whether your LLC has one owner or multiple owners:

California-Specific Operating Agreement Provisions

California has several state-specific provisions that should be addressed in your operating agreement:

• Series LLCs: California does not recognize series LLCs formed under other states’ laws, so don’t try to bring a Delaware series LLC to California without proper legal advice.
• Professional LLCs (PLLCs): California restricts certain licensed professions (doctors, lawyers, accountants) from forming standard LLCs — they must form PLLCs with specific provisions. If your LLC involves a licensed profession, address this in the OA.
• California’s RULLCA default rules: Explicitly override any default rules you don’t want to apply — include language like “notwithstanding any default rules under the California Revised Uniform Limited Liability Company Act, the members agree that…”
• Tax elections: If you plan to elect S-Corp treatment, include language in the OA about corporate formalities and reasonable compensation requirements.

Can I Use a Free Template?

Yes — a free template is vastly better than no operating agreement at all. However, be aware of the limitations: generic templates don’t address California-specific provisions, don’t account for your specific ownership structure, and won’t hold up as well in a dispute as a professionally drafted document. For a single-member LLC doing basic business, a solid template works fine. For multi-member LLCs, businesses with significant assets, or anyone taking on investors — pay for a real operating agreement or use a formation service (like Corp Nation) that provides a customized one.