LLC Operating Agreement (Single-Member)

An LLC operating agreement is an internal document that establishes how your limited liability company is managed, how profits and losses are allocated, and what happens if the business is dissolved. While Minnesota does not legally require a single-member LLC to have an operating agreement, having one is strongly recommended – it is often essential for maintaining the liability protection that an LLC provides and for opening business bank accounts.

This template is designed for single-member (one-owner) Minnesota LLCs governed by the Minnesota Revised Uniform Limited Liability Company Act ( Minn. Stat. Chapter 322C ).

When to Use This Template

• You have formed (or are forming) a single-member LLC in Minnesota and need an operating agreement
• A bank or lender requires a copy of your operating agreement to open a business account or approve a loan
• You want to establish a clear separation between your personal finances and business finances (this helps protect your personal assets)
• You want to document your management structure, capital contributions, and dissolution procedures
• You are applying for business licenses, contracts, or insurance that require an operating agreement

Before You Use This Template

You must first form your LLC with the Minnesota Secretary of State by filing Articles of Organization. If you have not yet done so, see our LLC formation guide.

Required before completing the operating agreement:

• Your LLC’s legal name (exactly as filed with the Secretary of State)
• Your LLC’s Articles of Organization filing date and filing number
• Your LLC’s registered agent and registered office address
• Your initial capital contribution amount

How to Use This Template

1. Download the template in your preferred format (PDF or DOCX).
2. Fill in your LLC’s legal name exactly as it appears on your Articles of Organization filed with the Minnesota Secretary of State.
3. Enter the date the LLC was organized (the date your Articles of Organization were filed or the effective date stated in the articles).
4. Enter the member’s (owner’s) full legal name and address.
5. Specify the initial capital contribution – the amount of money or value of property you are putting into the LLC.
6. Specify how profits and losses will be allocated. For a single-member LLC, this is typically 100% to the sole member.
7. Review the management provisions. As a single-member LLC, you are both the member and the manager. Document your authority to:
   • Open and manage bank accounts
   • Enter into contracts on behalf of the LLC
   • Hire employees or contractors
   • Buy or sell property
   • Take out loans
8. Review the dissolution provisions. Document under what circumstances the LLC will be dissolved and how assets will be distributed.
9. Sign and date the agreement. Keep the original in a safe place with your other business records.

Key Provisions Explained

Capital Contributions

Document the initial money, property, or services you contribute to the LLC. This is important because:

• It establishes your ownership interest
• It shows the LLC is a separate entity with its own assets
• It may be relevant for tax purposes

Management Structure

A single-member LLC in Minnesota can be either member-managed (you manage the business directly) or manager-managed (you appoint someone else to manage it). Most single-member LLCs are member-managed. Your operating agreement should specify which structure you are using.

Distributions

Document how and when you will take money out of the LLC. Important points:

• Distributions should be made from the LLC’s bank account to your personal account
• Keep records of all distributions
• Do not treat the LLC’s bank account as your personal account – this is called “commingling” and can jeopardize your liability protection

Dissolution

Document what triggers dissolution of the LLC and how the wind-up process works. Under Minnesota law ( Minn. Stat. § 322C.0701 ), an LLC is dissolved upon:

• The occurrence of an event specified in the operating agreement
• The consent of all members
• An administrative dissolution by the Secretary of State (typically for failure to file annual renewals)
• A judicial dissolution ordered by a court

Maintaining Your LLC After Formation

To maintain your LLC’s liability protection, follow these practices:

1. Keep business and personal finances separate. Use a dedicated business bank account. Never pay personal expenses from the business account or vice versa.
2. Sign contracts in the LLC’s name, not your personal name. Sign as “[Your Name], Member of [LLC Name].”
3. File your annual renewal with the Secretary of State each year.
4. Keep records. Maintain meeting minutes (even if you are the only member), financial records, and copies of all contracts.
5. Maintain adequate insurance. The LLC structure limits liability, but insurance provides additional protection.
6. Use the LLC’s legal name in all business dealings, invoices, website, and marketing materials.
7. Pay the LLC’s taxes. A single-member LLC is a “disregarded entity” for federal tax purposes – you report business income and expenses on Schedule C of your personal tax return. But you must still obtain a federal EIN and may need Minnesota state tax accounts.

Common Mistakes to Avoid

1. Not having an operating agreement at all. Without one, your LLC is governed entirely by Minnesota’s default statutory rules, which may not suit your needs, and you lose a key piece of evidence that your LLC is a separate entity.
2. Using the wrong LLC name. The name in your operating agreement must exactly match your filed Articles of Organization, including any “LLC” or “L.L.C.” designation.
3. Commingling funds. Using one bank account for both personal and business transactions is the most common way people lose their liability protection.
4. Forgetting to file annual renewals. If you miss the annual renewal, the Secretary of State may administratively dissolve your LLC.
5. Not updating the agreement. If you bring in a new member, change your business address, or make other significant changes, update your operating agreement.
6. Using a multi-member template for a single-member LLC. The provisions are different. This template is specifically designed for single-member LLCs.
7. Signing contracts in your personal name. Always sign as a representative of the LLC, not in your individual capacity.

Minnesota LLC Formation Costs

Tax Considerations

Federal Taxes

A single-member LLC is a disregarded entity for federal tax purposes by default. This means:

• Business income and expenses are reported on Schedule C of your personal Form 1040
• You pay self-employment tax (15.3%) on net business income
• You make quarterly estimated tax payments to the IRS
• You can elect to be taxed as an S-Corporation (Form 2553) – consult a tax professional to determine if this is beneficial for your situation

Minnesota State Taxes

• Report LLC income on your Minnesota Form M1 (individual income tax return)
• You may need to register for Minnesota sales tax if you sell taxable goods or services
• You may need to register for Minnesota unemployment insurance and workers’ compensation if you hire employees
• Register for applicable tax accounts through the Minnesota Department of Revenue

Related Resources

• Minnesota Secretary of State - Business Filing – file Articles of Organization and annual renewals
• IRS - Apply for an EIN – free federal employer identification number
• Minnesota Department of Revenue – state tax registration and filings
• SCORE Minnesota – free business mentoring