If you’re searching for “LLC bylaws,” you’re likely trying to understand the internal rules that govern a limited liability company (LLC): how ownership works, who has decision-making authority, and how the business operates day to day. LLCs don’t use bylaws in the corporate sense, but they do rely on an operating agreement to define those rules.

Below, we explain how LLC governance works in the US, how operating agreements compare to bylaws, and what to include to avoid costly misunderstandings as your business grows.

What’s in this article?

• Do LLCs have bylaws?
  
• What is an LLC operating agreement?
  
• Is an LLC operating agreement the same as bylaws?
  
• Why does an LLC need an operating agreement?
  
• What should be included in an LLC operating agreement?
  
• What are common mistakes with LLC operating agreements?
  
• How Stripe Atlas can help
  

Do LLCs have bylaws?

No, LLCs don’t have bylaws in the legal sense. Bylaws are a corporate document. They belong to corporations and are designed for a governance system built around shareholders, boards of directors, officers, and formal voting procedures. LLCs are built differently. They don’t have shareholders, and they’re meant to be flexible. The equivalent governing document is an operating agreement.

What is an LLC operating agreement?

An LLC operating agreement is the document that turns an LLC from a legal filing into a functioning business. It’s an enforceable agreement that defines how the business is structured, managed, and run on a day-to-day basis. It outlines the rights, responsibilities, and expectations for LLC members and sometimes managers.

Is an LLC operating agreement the same as bylaws?

An LLC operating agreement plays a similar role to bylaws, but they’re not the same document. The difference matters because LLCs and corporations are governed under different rules. Bylaws are for corporations, while operating agreements are for LLCs. Both establish internal governance rules, but they reflect fundamentally different legal frameworks.

Here are the main differences:

• Formality vs. flexibility: Corporate bylaws assume a structure with shareholders, directors, officers, and formal meetings. Operating agreements are built for LLCs, which might have none of these.

• Customization: Operating agreements provide greater flexibility in defining ownership economics, management authority, and voting rules.

• Legal posture: Corporate bylaws are typically required by state law and adopted by the board. Operating agreements are usually not required, but they’re enforceable contracts once adopted by the members.

• Contractual nature: Operating agreements are typically signed by the members, which reinforces that the rules are mutually agreed upon rather than imposed by default.

So, while you might hear an operating agreement referred to as “LLC bylaws,” using the correct document helps ensure clarity and enforceability, and aligns with how LLC law actually works.

Why does an LLC need an operating agreement?

An operating agreement is what keeps an LLC on track. Having one matters both internally and externally.

A well-drafted agreement should:

• Clarify authority and decision-making: It defines who can act on behalf of the company and how decisions are made, rather than leaving those questions open to interpretation.

• Reduce internal disputes: Clear rules give members a shared reference point when disagreements arise.

• Override default state rules: Without an agreement, default LLC statutes with generic rules often take precedence, which might not match how the business operates.

• Support limited liability: Formal governance helps demonstrate that the LLC is a real, separate entity with its own governance, thereby supporting the liability shield LLCs provide.

• Set financial expectations: It explains how profits, losses, and distributions work, when distributions happen, and how capital is handled, which prevents surprises later.

• Facilitate banking and contracts: Banks and counterparties often require an operating agreement to confirm ownership and authority.

• Create continuity: It provides a roadmap for ownership changes, new members, and eventual dissolution.

• Signal expertise: A thoughtful operating agreement shows that the business is intentional and structured well.

What should be included in an LLC operating agreement?

There’s no single correct operating agreement, but strong ones consistently cover the following topics:

• Ownership and contributions: Who the members are, what they own, and what they contributed or committed to contribute.

• Management structure: Whether the LLC is member-managed or manager-managed, and how authority is divided.

• Decision-making and voting: Voting rights, approval thresholds, and how deadlocks are resolved.

• Economic rights: Allocation of profits and losses, timing of distributions, and tax-related distributions if applicable.

• Member changes and transfers: Rules for admitting new members, transferring ownership interests, buyouts, and exits.

• Events affecting members: Procedures for death, disability, incapacity, or bankruptcy.

• Dissolution: Plans for dissolution and how assets and liabilities are handled.

• Amendments: How the agreement can be changed and what consent is required.

• Authority and execution: Who can sign contracts and take legal action on behalf of the LLC.

• Tax and accounting treatment: How the LLC is treated for tax purposes and how financial records and reporting are internally handled.

• Dispute resolution and governing law: How disputes are handled and which state’s law governs the agreement.

What are common mistakes with LLC operating agreements?

When dealing with LLC operating agreements, problems can come from avoiding difficult conversations, relying too heavily on templates, or failing to treat the document as a working tool.

Here are some common mistakes:

• Not having one at all: Default state rules take over, often with unintended results.

• Relying on generic templates: Boilerplate language can create gaps, conflicts, or irrelevant provisions.

• Leaving authority unclear: Ambiguity about decision-making power can stall operations or lead to disputes.

• Ignoring exit scenarios: Planning for member departures or transfers is often overlooked, but it’s important to clarify what happens when membership changes.

• Creating internal inconsistencies: Conflicting provisions can undermine enforcement.

• Failing to update the agreement: Ownership changes, new managers, or tax elections should prompt revisions.

• Not executing or retaining signed copies: An unsigned or missing agreement is much harder to enforce.

• Misaligning tax treatment and economics: Conflicts between the agreement and tax elections can create compliance issues.

How Stripe Atlas can help

Stripe Atlas sets up your company’s legal foundations so you can fundraise, open a bank account, and accept payments within two business days from anywhere in the world.

Join 75K+ companies incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

Applying to Atlas

Applying to form a company with Atlas takes less than 10 minutes. You’ll choose your company structure, instantly confirm whether your company name is available, and add up to four cofounders. You’ll also decide how to split equity, reserve a pool of equity for future investors and employees, appoint officers, and then e-sign all your documents. Any cofounders will receive emails inviting them to e-sign their documents, too.

Accepting payments and banking before your EIN arrives

After forming your company, Atlas files for your EIN. Founders with a US Social Security number, address, and cell phone number are eligible for IRS expedited processing, while others will receive standard processing, which can take a little longer. Additionally, Atlas enables pre-EIN payments and banking, so you can start accepting payments and making transactions before your EIN arrives.

Cashless founder stock purchase

Founders can purchase initial shares using their intellectual property (e.g., copyrights or patents) instead of cash, with proof of purchase stored in your Atlas Dashboard. Your IP must be valued at $100 or less to use this feature; if you own IP above that value, consult a lawyer before proceeding.

Automatic 83(b) tax election filing

Founders can file an 83(b) tax election to reduce personal income taxes. Atlas will file it for you—whether you are a US or non-US founder—with USPS Certified Mail and tracking. You’ll receive a signed 83(b) election and proof of filing directly in the Stripe Dashboard.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company. Atlas C corp documents are built in collaboration with Cooley, one of the world’s leading venture capital law firms. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution, and tax compliance.

A free year of Stripe Payments, plus $50K in partner credits and discounts

Atlas collaborates with top-tier partners to give founders exclusive discounts and credits. These include discounts on essential tools for engineering, tax, finance, compliance, and operations from industry leaders like AWS, Carta, and Perplexity. We also provide you with your required Delaware registered agent for free in your first year. Plus, as an Atlas user, you’ll access additional Stripe benefits, including up to a year of free payment processing for up to $100K in payments volume.

Learn more about how Atlas can help you set up your new business quickly and easily, and get started today.