Operating Agreement LLC Washington D.C.

A Washington D.C. Limited Liability Company (LLC) Operating Agreement is the internal document that governs how the LLC will function. It outlines ownership rights, management responsibilities, and the procedures members will use to run the business. Some refer to it as a District of Columbia Operating Agreement or D.C. LLC Company Agreement. Regardless of the name used, it serves as the primary internal governance record for the company.

Many LLCs adopt an Operating Agreement during formation, while others create one later as the business grows. The agreement is not filed with the District and is stored with the LLC’s internal records.

Is a Washington D.C. Operating Agreement Required?

Washington D.C. does not require LLCs to adopt an Operating Agreement. Under the D.C. Business Organizations Code, an agreement may be written or oral. Even though it is not mandatory, creating a written Operating Agreement is strongly recommended. Without one, the LLC follows the default statutory rules in Title 29, which may not reflect how the members prefer to manage the business.

Why Washington D.C. Operating Agreement Matters

Maintains limited liability protection

A written Operating Agreement helps show that the LLC is treated as a separate legal entity. Courts may consider how well the LLC follows internal governance practices when reviewing limited liability protections. This is particularly important for single member LLCs, where documentation helps separate the owner from the business.

Establishes internal rules and expectations

District statutes apply by default only when an Operating Agreement is silent. A written agreement lets members define how decisions are made, how profits are shared, how disputes are resolved, and how responsibilities are allocated.

Required by financial institutions and third parties

Banks, lenders, and accountants often require an Operating Agreement when opening accounts or verifying ownership. The document clarifies who has authority to act for the LLC and shows how the company is structured internally.

Key Provisions to Include

A Washington D.C. Operating Agreement typically includes the following:

Basic Company Details

• LLC name
• Business purpose
• Principal office
• Duration
• Federal tax classification Washington D.C. requires LLC names to include Limited Liability Company, LLC, or an accepted abbreviation.

Registered Agent and Office

• Identifies the District registered agent responsible for receiving legal notices
• Any changes must be filed with the D.C. Department of Licensing and Consumer Protection (DLCP)

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 decision making authority and responsibilities associated with each structure

Profit and Loss Allocation

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

Tax Election

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

Voting Procedures

• Voting rights
• Quorum rules
• Decision making requirements: Many D.C. LLCs base voting on ownership percentages unless otherwise stated.

Transfers of Interest

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

Records and Bookkeeping

• How financial statements, meeting notes, and tax filings will be maintained
• Requirement to file the Washington D.C. Biennial Report to remain in good standing

Compensation

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

Dissolution

• Events that may trigger dissolution
• Steps for winding up the LLC’s affairs
• Filing Articles of Dissolution with the D.C. DLCP

Amendments

• How members may amend the Operating Agreement. Most D.C. LLCs require written member approval for changes.

Management Options for Washington D.C. LLCs

Member Managed

Members handle daily operations and may bind the LLC through their actions. This structure works well when all owners participate in management. Voting power typically corresponds to ownership unless the agreement specifies another method.

Manager Managed

Members appoint one or more managers to oversee day-to-day operations. Managers may be members or outside individuals. Members retain authority over major decisions but do not handle routine management tasks unless specified.

Creating and Maintaining Washington D.C. Operating Agreement

Drafting and Signing

The Operating Agreement becomes effective when adopted by the members. Washington D.C. allows written and oral agreements, but a written document is preferred for clarity and legal certainty. The agreement is not filed with the District.

Recordkeeping

The agreement should be stored with the LLC’s internal files at its principal office. Each member should maintain a copy. Filing the Biennial Report is necessary to keep the LLC active and in good standing.

Amending the Agreement

Members may amend the Operating Agreement using the procedure established within the document. If the amendment affects information filed with the District, such as the registered agent or business address, the LLC must submit an update to the D.C. DLCP.