Is an Operating Agreement Legally Required?

An operating agreement (often called a company agreement or LLC agreement) sets out the basic rules and procedures of your LLC. You ought to have an operating agreement for your LLC.

I'll say it again: you ought to have an operating agreement for your LLC.

But is it actually, legally required by your state?

Does California require an operating agreement?

Yes, in a way. California law requires that an LLC have an operating agreement, but the law allows it to be oral, written, or implied. That last one is the kicker.

Until about 2014, California law explicitly required LLCs to have an operating agreement. See former Corp. Code section 17050 ("...the members shall have entered into an operating agreement."). However, there is no current mandatory equivalent. (See Cal. Corp. Code sections 17701.01 to 17713.13).

Section 17701.02(s) defines "operating agreement" as "the agreement...whether oral, in a record, implied, or in any combination thereof..." It then states that the operating agreement may include simply the agreement between members to form an LLC, and it clarifies that the operating agreement is not unenforceable just because there is only one member.

I read these sections to mean that an operating agreement is required under California law. Because it is required, if you don't have one, the LLC's constituents, counsel, or a Court will cobble one together from the defaults in the statutes and the various documents, emails, and agreements you have with your co-members. If you do not have one, it will be implied because the LLC has to have one.

The California Secretary of State website states explicitly that an operating agreement is required. See "Starting a Business – Entity Types" ("an operating agreement among the members as to the affairs of the LLC and the conduct of its business is required"). This aligns with the statutory requirement (or presumption), though the law allows flexibility in form.

In short, yes, you need an operating agreement, but it does not need to be written. If you do not have one, written or verbal, you actually have an implied agreement.

Does Texas require a company agreement?

No.

Like California, the Texas Business Organizations Code has several sections that appear to presume a company agreement.

Texas defines a company agreement as "any agreement, written or oral, of the members concerning the affairs or the conduct of the business of a limited liability company." Bus. Orgs. Code section 101.001(1). "[A]ny agreement" suggests to me that there is an understanding that there might not be one. And the fact that it limits such agreement to "written or oral," but not to "implied," suggests Texas courts aren't necessarily going to create one for your LLC.

Moreover, Texas gives LLCs an explicit out: you can put the information in your Certificate of Formation instead, and forego a company agreement. See section 101.051.

[NOTE: This refers only to the general, statutory requirements. There may be other entities that do require an operating/company agreement; for example, the Texas Real Estate Commission requires certain documents in order to license an LLC as a broker, often including an operating agreement.]

In short, no, Texas does not require an operating agreement. But, let me reiterate, you still ought to have one. As in California, it is highly recommended to have one to clarify operations, ownership, and liability protections.

What about other states?

Some states require operating agreements explicitly, others don't. You'll need to check with a business attorney in your state to see what your state requires (or does not require).

Summary

In both Texas and California (and, likely, in all states), you ought to have an operating/company agreement. In California, you have one if you have an LLC, it's just a matter of what the terms are and who interprets them. In Texas, it is not required by law.

The question here refers to whether an operating/company agreement is a legal requirement. For California, the answer is yes (flexibly); for Texas, the answer is no.

[UPDATE: Based on the lack of clear statutory language, a former version of this post simply concluded that California does not require an operating agreement. This position lacked necessary nuance, which can be summarized as above: "If you do not have one [...] you actually have an implied agreement."]