Do You Really Need an Operating Agreement for Your Maryland LLC?
(Short answer: Yes. Long answer: Still yes, and here’s why.)
Filing an LLC in Maryland is Easy
A few clicks on SDAT’s website, a filing fee, and suddenly you’re in business.
But here’s where people cut corners — they skip the operating agreement because they think:
It’s just me, I don’t need one
We trust each other, we’re friends
It’s not required by the state
And yes, Maryland doesn’t require you to file or even create an operating agreement when forming your LLC.
But not having one? That’s a risk. A big one.
What Maryland Law Actually Says
Under Md. Code, Corps. & Ass'ns § 4A-402, LLC members may enter into an operating agreement "to regulate the affairs of the limited liability company and the conduct of its business."
You’re not required to file this agreement with the state, but once signed, it becomes legally binding.
If there’s no agreement? The law defaults to the Maryland LLC Act, a one-size-fits-all rulebook that rarely fits how real businesses operate.
What Happens If You Skip the Operating Agreement
If you don’t have one, Maryland’s default rules apply. That means:
All members are assumed to have equal ownership and voting power
No clear plan for departures, death, or nonperformance
Profits and losses are divided equally, not based on effort or capital
No formal structure for decision-making or conflict resolution
This might be fine when everything’s going smoothly, but during a dispute or major change, it becomes a major liability.
Why Even Single-Member LLCs Should Have One
If you're a solo owner, you might ask, "Why bother?"
Here’s why:
It shows you’re treating the business as separate from yourself, which strengthens your liability shield
Lenders may require it for financing or account setup
It documents your plans for income, succession, and recordkeeping
Courts can and do pierce the corporate veil in Maryland if the LLC isn’t run as a distinct legal entity. A signed operating agreement is a key safeguard.
What You Should Include in a Maryland Operating Agreement
1. Member Information and Ownership
Member names and contact info
Ownership percentages or units
Capital contributions (cash, services, property)
2. Management Structure
Member-managed or manager-managed?
Who makes decisions day to day?
Who can sign contracts on behalf of the LLC?
3. Voting Rights and Rules
What requires a vote?
One vote per member vs. weighted by ownership
What happens in case of a tie?
4. Profit and Loss Allocation
How and when profits are distributed
How losses are handled for tax purposes
Are distributions mandatory?
5. Adding or Removing Members
How new members are admitted
Buyout rules
Grounds for involuntary removal
6. Transfers, Death, and Succession
Can interests be sold or assigned?
Do other members have first refusal rights?
What happens if a member dies or is incapacitated?
7. Dissolution and Winding Up
How and when the LLC can dissolve
Who handles closure
How assets and debts are distributed
8. Dispute Resolution
Will disputes go to mediation, arbitration, or court?
Who pays legal fees?
Where are disputes handled (venue)?
Common Mistakes in Operating Agreements for LLCs
Copying templates from other states
Agreements that don’t match how the business actually runs
No mention of buyouts or succession
Conflicts between the agreement and the LLC’s Articles of Organization
No agreement at all — just an email thread and handshake
What to Do Now?
If you already formed your Maryland LLC but haven’t created (or reviewed) an operating agreement:
Start here:
Gather ownership and role details
Talk to your co-members now, not during a crisis
Customize the agreement to match Maryland law and your operations
Store it with company records
Review it annually or after big changes
Final Thought
Your LLC might be legally formed, but it’s not legally protected unless you treat it like a real business.
An operating agreement isn’t paperwork. It’s your foundation — for avoiding disputes, growing properly, and staying protected.
Need help drafting or reviewing one?
Because “we’ll figure it out later” isn’t a business plan.
It’s a lawsuit waiting to happen.