California LLC Operating Agreement — 2026

An Operating Agreement is the foundational governance document for a California Limited Liability Company. Under the California Revised Uniform Limited Liability Company Act (RULLCA), every California LLC is required to have an operating agreement — making it one of the few US states to mandate one by statute. The operating agreement governs the internal affairs of the LLC, the rights and obligations of members, the allocation of profits and losses, voting and management authority, and the procedures for dissolving the company. Without a detailed operating agreement, the default statutory rules of the RULLCA will apply, which may not reflect the members' intentions. Our template covers both member-managed and manager-managed structures, and includes a California-specific single-member variant.

California Corporations Code §17701.01 et seq. (Beverly-Killea LLC Act)

Note for Canadian clients: If you are a Canadian resident forming a California LLC, you may have additional US tax filing obligations, including filing a US federal tax return and potentially a California state return. Consult a cross-border tax advisor before forming a US entity.

California-Specific Requirements

  • Every California LLC must have an operating agreement under Corp. Code §17701.10 — it need not be written, but a written agreement is essential for protecting member rights
  • Member-managed vs. manager-managed: the management structure must be stated in the Articles of Organization filed with the California Secretary of State (Form LLC-1)
  • Annual minimum franchise tax: $800 per year, due to the California Franchise Tax Board regardless of income or activity
  • Additional LLC fee based on California gross receipts (ranges from $0 to $11,790+ depending on revenue)
  • California LLCs with income from California sources must file Form 568 (LLC Return of Income) annually
  • Statement of Information (Form LLC-12) must be filed within 90 days of formation and biennially thereafter
  • California does not permit perpetual duration by default — the operating agreement should state whether the LLC has a fixed or perpetual term
  • Registered agent in California is required (must have a physical California address)

Member-Managed vs. Manager-Managed

  • Member-managed: All members have equal authority to bind the LLC and participate in day-to-day management. Voting rights are typically proportional to membership interest. Best for small LLCs where all members are active participants.
  • Manager-managed: A designated manager (or managers) controls the LLC. Members who are not managers are passive investors with limited management rights. Best for LLCs with outside investors or where operational control is centralized.
  • The management structure must be selected at formation and noted in the Articles of Organization — it can be changed later but requires amending the Articles.

What's Included in This Template

  • Formation and purpose provisions (name, principal place of business, registered agent)
  • Member-managed and manager-managed variants (select applicable version)
  • Member capital contributions and membership interest table
  • Profit and loss allocation provisions
  • Distribution provisions (including tax distribution waterfall)
  • Voting rights and decision-making procedures
  • Transfer restrictions and right of first refusal
  • Buy-sell provisions (death, disability, voluntary exit, forced exit)
  • Deadlock resolution procedures (for multi-member LLCs)
  • California dissolution provisions and winding-up procedures
  • Single-member LLC variant with streamlined provisions
  • Indemnification and limitation of liability
  • California governing law clause

How to Complete This Document

  1. Select the management structure: member-managed or manager-managed. Ensure it matches your Articles of Organization (Form LLC-1).
  2. Enter the LLC's full legal name as registered with the California Secretary of State.
  3. List all members, their addresses, capital contributions, and initial membership interest percentages in the Members Schedule.
  4. Specify the profit and loss allocation method — typically proportional to membership interest, but may be customized.
  5. Complete the distribution section, including whether and when distributions will be made and the order of priority.
  6. Review and complete the buy-sell provisions, including the valuation method for departing members' interests.
  7. All members sign and date the agreement; each member retains a fully executed copy. Store with your LLC records book.
  8. File your Statement of Information (Form LLC-12) within 90 days of formation if you have not already done so.

Frequently Asked Questions

Is an operating agreement required for a California LLC?

Yes. Under the California Revised Uniform Limited Liability Company Act (Corp. Code §17701.10), every California LLC must have an operating agreement. While it does not need to be in writing and is not filed with the Secretary of State, a written operating agreement is strongly recommended to govern internal management, profit allocation, and member rights.

What is the difference between member-managed and manager-managed?

In a member-managed LLC, all members have authority to bind the company and participate in management decisions. In a manager-managed LLC, a designated manager (who may or may not be a member) has authority to act on behalf of the company. Manager-managed structures are common when some members are passive investors. The choice must be stated in the Articles of Organization filed with the California Secretary of State.

How is a California LLC taxed?

A California LLC is subject to an annual minimum franchise tax of $800 payable to the California Franchise Tax Board, plus an additional LLC fee based on gross receipts. Federally, a single-member LLC is a disregarded entity (taxed as a sole proprietor) and a multi-member LLC is a partnership by default, unless an election is made to be taxed as a corporation.

Can a single-member LLC use this operating agreement?

Yes, with modifications. A single-member LLC operating agreement has different provisions than a multi-member agreement — there are no voting rights, profit allocation among members, or deadlock procedures. Our template includes a single-member variant. Even for single-member LLCs, a written operating agreement is important to establish the separation between the member and the company.

What happens to a California LLC if a member wants to leave?

A member's right to withdraw and the consequences of withdrawal are governed primarily by the operating agreement. If the operating agreement is silent, California Corp. Code §17706.01 et seq. applies. Members generally may not force a buyout without provisions in the operating agreement. A well-drafted buy-sell provision is critical to manage member exits, death, disability, and disputes.

When You Need a Lawyer Instead

If your LLC will have more than three members, involve outside investors, include complex profit-sharing arrangements, or hold significant real estate or intellectual property assets — consult a licensed California business attorney before finalizing your operating agreement. The cost of a tailored agreement is small compared to the cost of member disputes later. LexChest can connect you with qualified California counsel.