Although I sometimes encounter LLCs operating without an Operating Agreement (known as a “Company Agreement” in TX), if the LLC has more than one member (owner), doing so is practically insane, and many states actually require one by law. Described generally, an Operating Agreement is an agreement among the members of the LLC which establishes most of the rights and obligations of the members among each other and in relation to the LLC. They can be quite extensive, covering things such as: management, ownership transfer restrictions, capital structure, taxes, how profits are distributed, dissolution of the LLC, and a host of other issues which are vital to the LLC and its members. An Operating Agreement is almost always the most important organizational document for an LLC, and can be quite complicated, particularly in terms of tax considerations. Unfortunately, it is also the place where entrepreneurs most commonly make a vital mistake in organizing their LLC. It is somewhat common to come across Operating Agreements which have been downloaded as a template online or recycled from another company, which can have potentially disastrous effects. This is probably the most complicated, difficult, and important step in properly forming an LLC, and I cannot stress enough how important it is to get a quality Operating Agreement specifically drafted by an attorney to fit the needs of your LLC.