Operating Agreement LLC North Dakota

A North Dakota Limited Liability Company (LLC) Operating Agreement is an internal document that explains how the company will be governed. It outlines ownership interests, establishes management authority, and defines the procedures members will follow when making business decisions. Some refer to it as a North Dakota Operating Agreement or North Dakota LLC Company Agreement. Regardless of the name used, it serves as the LLC’s primary internal governance document.

Many North Dakota LLCs adopt an Operating Agreement during formation, while others prepare one later as the business develops. The agreement is not filed with the state and remains part of the LLC’s internal records.

Is a North Dakota Operating Agreement Required?

North Dakota does not require LLCs to adopt an Operating Agreement. Under North Dakota Century Code Chapter 10-32.1, an Operating Agreement may be written, oral, or implied. Although optional, a written Operating Agreement is strongly recommended. Without one, the LLC defaults to statutory rules that may not reflect how members intend to manage or structure the business.

Why a North Dakota Operating Agreement Matters

Helps preserve limited liability protection

A written Operating Agreement helps demonstrate that the LLC operates as a separate legal entity. Courts may review internal records when evaluating whether limited liability protections apply, particularly for single member LLCs.

Establishes customized internal procedures

North Dakota’s statutory default provisions apply only when the Operating Agreement does not address an issue. A written agreement allows members to define voting rights, management responsibilities, profit distributions, and dispute resolution procedures.

Required by banks and professional advisers

Banks, lenders, accountants, and attorneys often request an Operating Agreement to verify ownership and confirm who has authority to act on behalf of the LLC.

Supports compliance with North Dakota’s Annual Report requirement

North Dakota LLCs must file an Annual Report each year. Assigning responsibility for this filing within the Operating Agreement helps maintain good standing.

Key Provisions to Include in a North Dakota Operating Agreement

Basic Company Details

• LLC name
• Business purpose
• Principal office address
• Duration of the LLC
• Federal tax classification

North Dakota requires LLC names to include Limited Liability Company, LLC, or an accepted abbreviation.

Registered Agent and Office

• Name and North Dakota street address of the registered agent
• Procedures for changing the registered agent
• Filing requirements with the North Dakota Secretary of State

Member Information

• Names and addresses of members
• Ownership percentages
• Initial capital contributions

Capital Contributions

• Description of each member’s contribution
• Rules for future contributions
• Statement that contributions do not earn interest unless agreed

Management Structure

• Whether the LLC is member managed or manager managed
• Duties and authority of members or managers
• Procedures for appointing or removing managers

Profit and Loss Allocation

• Allocation of profits and losses
• Timing and conditions for distributions
• Confirmation that distributions may only be made if the LLC can meet its obligations

Tax Election

• Federal tax classification selected by the LLC
• Statement that certain elections require IRS filings

Voting Procedures

• Voting rights of members
• Quorum requirements
• Vote thresholds for approving actions

North Dakota LLCs commonly base voting on ownership percentages unless modified by agreement.

Transfers of Interest

• Rules for voluntary and involuntary transfers
• Admission procedures for new members
• Treatment of interests upon withdrawal, death, or expulsion

Records and Bookkeeping

• Procedures for maintaining company and financial records
• Assignment of responsibility for filing North Dakota’s Annual Report
• Statement that failure to file may result in penalties or administrative dissolution

Compensation

• Rules for compensating members, managers, or officers
• Reimbursement policies for business expenses

Dissolution

• Events that may trigger dissolution
• Steps for winding up the LLC
• Filing Articles of Dissolution with the North Dakota Secretary of State

Amendments

• Procedures for modifying the Operating Agreement
• Requirement that amendments be approved in writing unless otherwise stated

Management Options for North Dakota LLCs

Member Managed

Members manage daily operations and have authority to act on behalf of the LLC. This structure is common for small or closely held companies. Voting rights typically align with ownership percentages unless changed in the agreement.

Manager Managed

Members appoint one or more managers to oversee daily operations. Managers may be members or nonmembers. Members retain authority over major decisions while delegating routine management tasks.

Creating and Maintaining the North Dakota Operating Agreement

Drafting and Signing

The Operating Agreement becomes effective once adopted by the members. North Dakota recognizes written, oral, and implied agreements, but a written document provides clarity and reduces disputes.

Recordkeeping

The agreement should be stored with the LLC’s permanent records. North Dakota requires annual filings, making organized documentation essential for compliance.

Amending the Agreement

Members may amend the Operating Agreement by following the procedures outlined within it. If amendments affect information on file with the state, the LLC must submit updated filings.