Every Vermont 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.
Vermont LLC Operating Agreement (Member-managed)
Vermont LLC Operating Agreement (Manager-managed)
What is a Vermont LLC Operating Agreement?
A Vermont 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 Vermont LLC Articles of Organization. Operating Agreements should include:
- LLC Name
- LLC effective date
- Vermont 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” (aka “Ownership 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 Vermont 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 Vermont?
As per Section 4001 of the Vermont LLC Act, an Operating Agreement isn’t required for Limited Liability Companies in Vermont.
But while it’s not required in Vermont 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 Vermont 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. And that 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 interests, profit distribution, company operations, 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 Vermont Secretary of State, the Internal Revenue Service, or any other government agency.
Operating Agreements are “internal documents”. Meaning, the Members just need to keep a copy with their company 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 bank accounts
- 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, 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 customize to write your own LLC Operating Agreement.
How do you write a simple Operating Agreement?
If you wanted to write a simple Vermont Operating Agreement without using a template, you could. You’d need to check with the Vermont LLC Act to make sure it meets all the requirements.
For example, at a minimum, you’d want your Vermont 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 Articles 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 Vermont?
Here are the steps to starting an LLC in Vermont:
- Choose an LLC name and make sure it’s available
- Choose who will be your Vermont Registered Agent
- File the Vermont LLC Articles of Organization
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the IRS
- Research business license requirements
- Open a business bank account
Recommendation: Speak with a business attorney or an accountant if you need legal or tax advice in any of these steps.
References
Vermont LLC Act
IRS: Paying Yourself
Vermont Secretary of State: Limited Liability Companies
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.
Hello,
I am currently filling out the operating agreement and I have question regarding the “Capital Provisions” section. My business is a single-member LLC, but I have yet to take out a loan to cover startup costs. In this case, what do I put under “Contribution”?
Thank you.
Hi Noah, you can make the capital contribution $100 if you’d like. It’s not the final/only capital contribution you can make to the LLC. It’s just the initial one. You can also make this amount equal to the amount of your initial deposit when you open your LLC checking account. Hope that helps.