Every Iowa LLC should have an Operating Agreement, but getting one doesn’t have to be expensive. You can download and customize your own Operating Agreement using our free template below.
Iowa LLC Operating Agreement (Member-managed)
Iowa LLC Operating Agreement (Manager-managed)
What is an Iowa LLC Operating Agreement?
An Iowa LLC Operating Agreement is a written contract between the LLC Members (LLC owners). This legal document includes detailed information about LLC ownership structure, who owns the company and how the LLC is managed.
Single-Member LLCs and Multi-Member LLCs should draft an Operating Agreement, keep it with their business records, and give a copy to all Members.
What should be included in LLC Operating Agreements?
Basic Information
Your Operating Agreement will include basic information about your Limited Liability Company. Some of the information will be the same as what is listed in your Iowa LLC Certificate of Organization. Operating Agreements should include:
- LLC Name
- LLC effective date
- Iowa Registered Agent (if applicable)
- purpose of your LLC
- duration of your LLC
- and how your LLC will be taxed
Related reading: Is a Registered Agent a Member of an LLC?
LLC Ownership
Your Operating Agreement will list all the LLC Members and how much of the Limited Liability Company they each own.
How much of the LLC someone owns is called their “LLC Membership Interest”.
LLC Membership Interest is most often expressed as a percentage (like 5%, 50%, 100%, etc.).
Initial Capital Contributions (putting money into your LLC)
After your LLC is approved, you should open an LLC bank account and put money into that account.
Each of the LLC Members makes an initial capital contribution. Capital contribution simply means a deposit of money into the LLC bank account.
You will list the initial capital contributions in your LLC’s Operating Agreement.
Pro tip: If you complete your Operating Agreement before you have opened an LLC bank account, just enter the amount the Members plan to deposit. If the amount of your deposit changes, it’s okay to edit your Operating Agreement with the actual amounts later.
- Related article: To learn more about capital contributions, like how much you should contribute, check out LLC Capital Contributions.
Statement about taxes
You will list how your LLC will be taxed in your Operating Agreement. There are four common ways an LLC can be taxed:
- LLC taxed as a Sole Proprietorship
- LLC taxed as a Partnership
- LLC taxed as an S-Corporation
- LLC taxed as a C-Corporation
Voting Rights of LLC Members
The rules of membership voting will be spelled out in your Iowa LLC’s Operating Agreement.
If you use the Member-managed Operating Agreement, the voting powers are proportionate to the LLC Membership Interest.
If you use the Manager-managed Operating Agreement, the voting powers are also proportionate to the LLC Membership Interest. Then the Members vote to elect a Manager or Managers. The Manager(s) then has authority to make certain decisions on behalf of the LLC (without needing a vote by the Members).
However, certain things, like adding or removing an LLC Member, require a vote of the Members (and the Manager has no say).
Make sure all LLC Members have a copy
Once you finalize your Operating Agreement, make sure all the Members have a copy.
We recommend keeping a copy of the Operating Agreement with your LLC business records.
Operating Agreement FAQs
Is an Operating Agreement required for an LLC in Iowa?
As per Section 489.110 of the Iowa Statutes, Iowa LLC Operating Agreements aren’t required for LLCs in Iowa.
But while it’s not required in Iowa to conduct business, we strongly recommend having an Operating Agreement for your LLC.
Additionally, financial institutions (like banks) and other organizations may need to see a copy of this paperwork in order for you to do business with them.
Why should an LLC with only one Member still have an Operating Agreement?
It’s best to have an Operating Agreement, even if you are the only Member of your Iowa LLC (a Single-Member LLC).
If you go to court, an Operating Agreement helps prove that your Single-Member LLC is being run as a separate legal entity. This confirms the limited liability status, and what is what protects your personal assets.
Does a Multi-Member LLC need an Operating Agreement?
It’s best to have an Operating Agreement, especially for a Multi-Member LLC. This document will spell out ownership percentages, operating procedures, profit distribution, and management responsibilities.
If you go to court, an Operating Agreement helps prove that your Multi-member LLC is being run as a separate legal entity.
Do I have to send my Operating Agreement to the state?
No, you don’t have to send your Operating Agreement to the Iowa Secretary of State, or any other government agency.
Operating Agreements are “internal documents”. Meaning, the Members just need to keep a copy with their business records.
The Operating Agreement is a legally binding document upon the LLC Members because of the Members’ signatures. It doesn’t need a government stamp of approval.
However, in the future, if your company were involved in a lawsuit or an audit, a court or government agency might ask to see a copy of your Operating Agreement.
Additionally, you may also need to show this document to:
- financial institutions when you open a business bank account
- financial institutions if you apply for a loan for the LLC
- a title company if your LLC is buying real estate
Does my LLC Operating Agreement need to be notarized?
No, your Operating Agreement doesn’t need to be notarized. Each Member just needs to sign it.
Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legal document.
Can I write my own Operating Agreement?
Yes, you can write your own LLC Operating Agreement – but we recommend using an Operating Agreement template.
An Operating Agreement is a legal document. You don’t have to hire an attorney to write one, though. Using a template helps make sure you cover everything you need to.
LLC University® offers free Operating Agreement templates that you can download and use to write your own customized Operating Agreement.
How do you write a simple Operating Agreement?
If you wanted to write a simple Iowa Operating Agreement without using a template, you could. You’d need to check with the Iowa LLC Act to make sure it meets all the requirements.
For example, at a minimum, you’d want your Iowa LLC name, your Registered Agent information, your business purpose, the names of the LLC Members, and information about initial capital contributions.
However, there is a lot more information that is important to document about your LLC.
It’s probably a lot easier to start with an existing template. We have a free Operating Agreement template you can download on this page.
What is the difference between an LLC and an Operating Agreement?
An LLC (Limited Liability Company) is a type of business structure. It’s a legal business entity that you form by filing a document called the Certificate of Organization with the state.
An Operating Agreement is an internal document that governs how your LLC is run. It contains rules about how much of the company each Member of the LLC owns, and other details about management and taxes.
Said another way, the LLC is your legal entity. And the Operating Agreement is a written set of rules for how the LLC will operate.
You could have an LLC without an Operating Agreement (but you shouldn’t). But you can’t have an Operating Agreement without an LLC.
How do I set up an LLC in Iowa?
Here are the steps to starting an LLC in Iowa:
- Choose an LLC name and make sure it’s available
- Choose who will be your Iowa Registered Agent
- File the Iowa LLC Certificate of Organization
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the IRS
- Research business license requirements
- Open an LLC bank account
References
IRS: Paying Yourself
Iowa LLC Act: Section 489.110
Iowa Secretary of State: How do I form an LLC
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
If the LLC starts with one owner then add multiple owners, how should the operating agreements work?
thanks
Hi Lam, typically, the Operating Agreement is amended. Or new Operating Agreement is created that supersedes the first Operating Agreement. Additionally, you’ll want a Sale of LLC Membership Interest form (or Assignment of LLC Membership Interest form) to transfer/sell the LLC ownership (called LLC Membership Interest) from the current Member(s) to the new Member(s).
Thanks Matt!
Sure thing Lam!
If you are having a Revocable Living Trust (husband and wife) be the member of the LLC . . would it be considered Sole Proprietorship and husband and wife need to sign it? Plus, if you are doing a Loan to the LLC (not a contribution) . . what do you put down then? Thank you!
Hi Laura, when you say “sign it”, do you mean the LLC Operating Agreement? If so, no, just the Trustee of the Revocable Living Trust would sign as the sole LLC Member. The LLC will be taxed as a Disregarded Entity. If you have an existing loan agreement between the Trust and the LLC, you can reference that agreement in the capital contributions section of the Operating Agreement. Ex: “$10,000 loan as per the loan agreement dated 1/1/2021”.
The Trustees of the Revocable Living Trust are both my husband and I . .so we both need to sign the Operating Agreement as sole members? We filed our EIN number and I just put down my husband’s name as sole member LLC . . .I couldn’t determine how to fill out the EIN Applic with the Trust’s name .. .will that be a problem?
Hi Laurie, you are not signing as sole members of the LLC. The Trust is the sole Member of the LLC. You two are the Trustees of the Trust. You are both signing on behalf of the Trust.
You can change the signature block to:
______________________________________
Sally Smith, Co-Trustee of the Smith Family Trust, dated 6/1/2020
______________________________________
Mark Smith, Co-Trustee of the Smith Family Trust, dated 6/1/2020
The dates above are the date the trust agreement was created. You should be able to find that date in the opening section of the Trust.
Technically, your husband is the EIN Responsible Party for the LLC (even though is says “SOLE MBR”) on the EIN Confirmation Letter (CP 575). We recommend speaking with an accountant to make sure taxes are filed correctly moving forward. Hope that helps :)
Could I have a copy of a manager-managed operating agreement?
Hey Rod, sure thing. We just emailed it over to you.
May I also have a copy of a manager-managed operating agreement? Thanks!
Hey Tammy, sure thing. We just emailed it over to you.
Do you have Operating Agreements for Manager Managed LLC?
Hi Doreen, we just emailed it over to you. Hope that helps.