Operating Agreement LLC Utah

A Utah Limited Liability Company (LLC) Operating Agreement is the internal document that governs how the company will operate. It outlines ownership rights, management authority, and procedures for financial and administrative decisions. Some refer to it as a Utah Operating Agreement or Utah LLC Company Agreement. Regardless of the term used, it is the primary internal record defining how the LLC is structured and managed.

Many LLC owners prepare the agreement when forming the business, while others adopt one later to better reflect how the company has developed. The document is kept internally and is not filed with the state.

Is a Utah Operating Agreement Required?

Utah does not require LLCs to adopt an Operating Agreement. Under the Utah Revised Uniform Limited Liability Company Act, an Operating Agreement may be written, oral, or implied. Even though it is not mandatory, creating a written agreement is strongly recommended. Without one, the LLC automatically follows the default statutory rules in Utah Code Title 48. These default rules may not match how the members want to manage or structure the business.

Why a Utah Operating Agreement Matters

Maintains limited liability protection

A written Operating Agreement helps show that the LLC operates separately from its owners. Courts often evaluate how well an LLC observes internal governance when determining whether to uphold limited liability protection. For single member LLCs, a written agreement provides important documentation demonstrating separation between the owner and the business.

Establishes internal rules and expectations

Utah’s statutory rules apply only when an Operating Agreement is silent. A customized Operating Agreement allows the LLC to define its own procedures for voting, management authority, financial distribution, and conflict resolution.

Required by financial institutions and third parties

Banks, lenders, and accountants often request an Operating Agreement before opening a business account or approving financing. The agreement helps verify ownership, identify who has authority to act on behalf of the LLC, and establish documentation supporting the company’s structure.

Key Provisions to Include

A Utah Operating Agreement typically includes the following:

Basic Company Details

• LLC name
• Business purpose
• Principal office
• Duration
• Federal tax classification
• Utah LLC names must include Limited Liability Company, LLC, or a permitted abbreviation.

Registered Agent and Office

• Identifies the Utah registered agent responsible for receiving legal notices
• Any change must be filed with the Utah Division of Corporations

Member Information

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

Capital Contributions

• Cash, property, or services contributed by each member
• Clarification that members are not automatically entitled to interest on contributions

Management Structure

• Whether the LLC is member managed or manager managed
• Description of the authority and responsibilities associated with the chosen structure

Profit and Loss Allocation

• How profits and losses will be allocated
• How and when distributions will be made
• Confirmation that distributions may be made only if the LLC can satisfy its debts

Tax Election

• Federal tax classification chosen by the LLC
• Note that certain elections require additional IRS filings

Voting Procedures

• Voting rights
• Quorum requirements
• Decision making thresholds. Many Utah LLCs base voting power on ownership percentage unless stated otherwise.

Transfers of Interest

• Procedures for adding or removing members
• Rules for transfers due to withdrawal, death, or expulsion
• Buyout procedures

Records and Bookkeeping

• How financial records, meeting notes, and tax filings will be maintained
• Utah’s annual renewal requirement with the Division of Corporations

Compensation

• How members or managers will be compensated if compensation is provided

Dissolution

• Events that may trigger dissolution
• Steps for winding up company operations
• Filing a Statement of Dissolution with the Utah Division of Corporations

Amendments

• How members may amend the Operating Agreement. Most Utah LLCs require written member consent for any changes.

Management Options for Utah LLCs

Member Managed

Members directly manage daily operations and have authority to bind the LLC. This structure is common for small companies where each owner actively participates. Voting power is typically proportional to ownership unless the agreement specifies otherwise.

Manager Managed

Members appoint one or more managers to oversee daily operations. Managers may be members or nonmembers. Members keep authority over major decisions but do not participate in routine management unless granted a defined role.

Creating and Maintaining the Utah Operating Agreement

Drafting and Signing

The Operating Agreement becomes effective once the members adopt it. Utah allows written, oral, and implied agreements, but a written document is strongly recommended. It is not filed with the state.

Recordkeeping

The agreement should be stored with the LLC’s permanent records at its principal office. Each member should retain a complete copy. Maintaining accurate internal records is especially important because Utah requires an annual renewal.

Amending the Agreement

Amendments must be made according to the procedures outlined in the Operating Agreement. Members typically prepare the updated version, review it, and sign it. If an amendment affects information filed with the state, such as the registered agent or business address, the LLC must submit the correct update form to the Utah Division of Corporations.