Operating Agreement LLC North Dakota

A North Dakota Limited Liability Company (LLC) Operating Agreement is a written contract among the members. It sets out who owns the company and how it is run. It also describes the rights and duties of members, managers, governors, and officers.

Purpose and Legal Role in North Dakota

The Operating Agreement works as the LLC’s internal rulebook. The Articles of Organization place the LLC on the public record but offer little detail about how the company will operate. The Operating Agreement, by contrast, covers most internal matters described in subsection 1 of Section 10-32.1-13. An agreement may be written, oral, implied, or formed from a mix of these.

North Dakota law governs the internal affairs of domestic LLCs. The Operating Agreement controls relations among members, relations between members and the LLC, management rights, company conduct, and amendment rules. If the Operating Agreement does not address an issue listed in subsection 1 of Section 10-32.1-13, the North Dakota Uniform Limited Liability Company Act applies.

Is a North Dakota Operating Agreement Required?

Section 10-32.1-13 does not require an LLC to adopt an Operating Agreement. Even so, a written version is widely used because it may support limited liability, document internal rules in multi member companies, and satisfy requests from banks or other groups.

North Dakota Filing Requirements

The Operating Agreement stays with the company’s records. It is not filed with the Secretary of State. Once signed by the members, it becomes binding. No notarization is needed.

If a filed document conflicts with the Operating Agreement, the agreement usually controls for members, dissociated members, transferees, managers, and governors. A filed document controls only for third parties who reasonably act on it.

The North Dakota Legislative Assembly may change or repeal the Act. All LLCs must follow such changes.

Parts of a North Dakota Operating Agreement

A short form Operating Agreement may list the LLC name, its Registered Agent, the business purpose, the member names, and each member’s initial capital contribution.

More complete agreements often include:

Basic Information

• LLC name, effective date, Registered Agent, purpose, duration, and tax classification.

Ownership Structure

• Names of all members and each member’s percentage interest.

Capital Contributions

• Initial contributions of money, property, or services. Members are not required to add more capital unless they all agree.

Taxation

• Election to be taxed as a sole proprietorship, partnership, S corporation, or C corporation. North Dakota is not a community property state, so a husband and wife cannot elect Qualified Joint Venture status.

Voting Rights

• Voting rules, often tied to each member’s percentage interest.

Management and Operations

• Whether the LLC is member managed, manager managed, or board managed. Some agreements may also address distributions, loans, or capital calls.

Fiduciary Duties and Buy-Sell Terms

• Member duties and the steps to follow if a member dies, becomes disabled, divorces, files bankruptcy, or faces another major event.

North Dakota Management Structures

The Operating Agreement selects the management style. If it does not, the LLC is member managed.

Member-Managed LLC

All members may act for the LLC. Voting power often matches each member’s right to receive distributions.

Manager-Managed LLC

One or more managers run daily operations. Members elect managers and vote on significant matters.

Board-Managed LLC

A board of governors directs company affairs.

North Dakota Authority and Limits Under the Act

The Operating Agreement may adjust fiduciary duties and may limit liability for money damages, except in cases involving loyalty breaches, intentional harm, or criminal acts.

The Operating Agreement may not:

• Place unreasonable limits on a member’s right to bring a claim. • Remove the duty of good faith and fair dealing, though it may set how that duty is measured. • Allow intentional misconduct or knowing legal violations. • Replace state rules governing internal affairs and liability.