Operating Agreement: what it is and why your LLC needs one

5 key sections of the Operating Agreement set the internal rules of your LLC: members, contributions, profit distribution and governance. Banks and processors require it.

The Operating Agreement is legally required in only 5 states (California, Delaware, Maine, Missouri and New York), but in practice every serious bank asks for it to open an LLC account.

An Operating Agreement is the internal backbone of your LLC. the private document that defines how your company works. Think of it as the "constitution" of your business, with rules that you define. Here's why it matters more than most people think.

What is an Operating Agreement?

An Operating Agreement is the internal governance document of your LLC. It establishes the rules of the game: who owns the LLC, how it's managed, how profits are distributed, and the tax classification. In most states, it doesn't need to be registered with any authority, which means its content remains completely private. Only you and the parties you choose (bank, payment processor) see it.

Compare this to the articles of incorporation of a Spanish SL, which is a notarial and public document. With an LLC, your internal rules, your ownership stake, and your tax classification stay between you and your company. Real privacy.

Why is it so important?

Without an Operating Agreement, your LLC is governed by the generic laws of the state where it's registered. That means you lose control over key business decisions.

But the importance goes beyond:

• Reinforces the separation between you and the LLC: crucial for maintaining asset protection. Without this document, the "corporate veil" is easier to pierce
• Required by banks and payment processors: Mercury, Stripe, and PayPal all request it to verify your LLC. Without it, you don't open an account
• Defines the intended tax classification: documents whether your LLC is treated as a Disregarded Entity for the <a href="https://www.irs.gov" target="_blank" rel="noopener">IRS</a>. The federal result still depends on activity, source of income, owner profile and whether there is ECI.
• Protects against disputes: if you add partners in the future, the rules are already written
• Privacy: as a private document, your data as owner and the financial rules of the LLC are not public

What a proper Operating Agreement includes

A complete Operating Agreement must cover:

• LLC data: legal name, state of formation, Registered Agent address
• Member data: full name, ownership percentage (100% for Single-Member)
• Purpose of the LLC: general description of business activity
• Tax classification: explicit statement that the LLC is treated as a Disregarded Entity for the IRS
• Initial capital: member's initial contribution (can be $0)
• Profit distribution: how profits are distributed (100% to the single member for Single-Member LLC)
• Management: who makes decisions (Member-Managed vs. Manager-Managed)
• Bank accounts: authorization to open and operate accounts in the LLC's name
• Indemnification: member protection against claims arising from LLC activity
• Dissolution: conditions under which the LLC can be dissolved
• Amendments: how to modify the agreement if circumstances change

Member-Managed or Manager-Managed?

For a Single-Member LLC owned by a freelancer or digital entrepreneur, the most common choice is Member-Managed: you as the sole member make all decisions. It's the most straightforward option and the one we use by default at Exentax.

Manager-Managed is used when you want to designate someone to manage the LLC on your behalf. Less common for freelancers, but can be useful in more complex structures.

What financial institutions look for in your Operating Agreement

When you open your account on Mercury, or register on Stripe, one of the first things they request is the Operating Agreement. They need to verify specific data:

Mercury reviews:

• That you are the sole owner (Single-Member) or authorized signatory
• That the LLC is classified as a Disregarded Entity (important for tax structure)
• That there is authorization to open bank accounts

Stripe verifies:

• That the person registering is the owner or is authorized
• The LLC structure and its declared activity

PayPal Business checks:

• Owner data and ownership percentage
• The declared business activity

If your Operating Agreement doesn't match the information you provide in applications, you get rejected or asked for corrections. Consistency across all documents is critical.

Common mistakes with Operating Agreements

Using a random internet template. Many templates are designed for US-resident LLC and don't include clauses specific to non-residents. Some templates classify the LLC as a Partnership (for multi-member) when your LLC is Single-Member, this completely changes your tax situation.

Not including the tax classification. If your Operating Agreement doesn't explicitly state that the LLC is a Disregarded Entity for the IRS, you're leaving a gap that can complicate your tax filing and confuse financial institutions.

Not signing it. Obvious, but it happens: the Operating Agreement must be signed and dated. An unsigned document has no validity and will be rejected by financial institutions.

Including inconsistent information. If the Operating Agreement says one thing and the Articles of Organization say another (LLC name, address, members), it creates inconsistencies that raise red flags during banking due diligence.

Using a template with US-resident language. If the template references Social Security Numbers, US addresses, or other US-resident specifics that don't apply to you, it can confuse the onboarding teams at Mercury and Stripe.

What we provide at Exentax

We prepare a customized Operating Agreement for every LLC we form. It's specifically designed for non-residents with Single-Member LLC: includes the correct tax classification (Disregarded Entity), the necessary privacy clauses, and the structure that Mercury and Stripe need to see. It's not a template. It is a document prepared for your specific case.

Operating Agreement: key clauses every non-resident needs

Your Operating Agreement must include specific provisions relevant to non-resident LLC ownership:

Exentax makes the weak point reviewable: decision, evidence and next task.

Why Mercury requires a signed Operating Agreement

Mercury specifically reviews your Operating Agreement during account opening. They look for:

• Your name as sole member (must match passport)
• The LLC's state of formation
• Manager-managed vs. member-managed designation
• Clear authority to open bank accounts
• Consistent information with your Articles of Organization

A standard Operating Agreement downloaded from the internet often fails Mercury's review because it doesn't include non-resident-specific provisions. At Exentax, every Operating Agreement is prepared for non-resident ownership and Mercury compatibility.

Document storage and organization

Create a secure digital system for all your LLC documents:

Critical documents (keep forever):

• Articles of Organization (original + certified copy)
• EIN Letter (CP575)
• Operating Agreement (signed, all versions)
• BOI/FinCEN scope memo or filing confirmation when in scope

Annual documents (keep 7+ years):

• Form 5472 + Form 1120 (filed copy)
• Form 7004 (extension confirmation)
• FBAR filing confirmation
• Mercury annual statements
• All invoices issued and received

Ongoing documents:

• Monthly Mercury statements
• Wise transfer records
• Client contracts

To keep going on this thread, <a href="/en/blog/open-a-us-llc-5-real-advantages-over-eu-shells">Why open a US LLC today: the 5 pillars of the American advantage</a> and <a href="/en/blog/itin-vs-ssn-for-llc-non-residents-w-7-and-caa">EIN vs ITIN vs SSN: the US tax identification numbers explained</a> fill in nuances this guide only touched on.

For an Operating Agreement, the important point is not that a template exists. The document should match ownership, management, signing authority, distributions and banking needs so third parties can read the LLC's internal logic.

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The Operating Agreement should reflect how the LLC is actually owned and managed. This guide explains the document; the final version should match members, authority, banking use and the company’s real governance.

Banking authority starts in the Operating Agreement

The Operating Agreement should support who can open, use and close accounts, not just allocate percentages:

• The Operating Agreement should support banking authority. Banks and fintechs often want to know who may open accounts, sign documents, control cards and approve payments.
• Ownership is not the same as signing authority. A multi-member LLC can have owners, managers and authorized signers with different powers. The banking file should reflect that distinction.
• Account applications should match the agreement. If one member applies as sole controller while the agreement says manager-managed or joint authority, the provider may ask for clarification.
• Exentax aligns governance and banking. The agreement, member records, banking resolution and provider application should all tell the same authority story.