Oregon LLC Operating Agreement — Why You Need One

Although Oregon does not legally require a written operating agreement, the Oregon LLC Act (ORS Chapter 63) gives this document extraordinary power to shape how your LLC operates. The operating agreement overrides most default provisions of ORS Chapter 63 — meaning without one, state law dictates your LLC's internal rules in ways that may surprise you. For the full formation process, see our Oregon LLC guide.

What the Oregon LLC Act (ORS Chapter 63) Says About Operating Agreements

Oregon's LLC statute explicitly recognizes operating agreements as the primary governing document. Under the Oregon LLC Act (ORS Chapter 63):

• The operating agreement governs relations among members, between members and the LLC, and the LLC's activities and affairs
• It can be written, oral, or implied — but written is the only practical option for enforceability
• It can modify or override most default provisions of ORS Chapter 63
• Courts enforce operating agreements as contracts between the members

What the operating agreement cannot override:

• The requirement to file with the Secretary of State
• Third-party rights (creditors, non-members)
• The duty of good faith and fair dealing (though it can define what these mean in context)
• Certain fiduciary duties cannot be entirely eliminated ), though they can be significantly restricted

Oregon Default Rules Without an Operating Agreement

If you don't have an operating agreement, ORS Chapter 63 fills the gaps — and the defaults may not match your intentions:

If you contributed 80% of the capital and your partner contributed 20%, the default is still 50/50 profit sharing. An operating agreement overrides this.

What to Include in Your Oregon Operating Agreement

Essential provisions:

1. Member information — Names, addresses, and ownership percentage of each member
2. Capital contributions — What each member contributed (cash, property, services) and requirements for future contributions
3. Profit and loss allocation — How profits and losses are distributed (can be different from ownership percentages for tax purposes under the Oregon LLC Act (ORS Chapter 63))
4. Management structure — Who makes decisions, authority limits, what requires a vote, and voting thresholds
5. Distributions — When and how cash distributions are made to members
6. Transfer restrictions — What happens when a member wants to sell, and right-of-first-refusal provisions
7. Member withdrawal or death — Buyout procedures, valuation methods, and payment terms
8. Dissolution triggers — What events cause or allow dissolution beyond the Oregon LLC Act (ORS Chapter 63) defaults
9. Dispute resolution — Mediation/arbitration clauses to avoid costly litigation
10. Books and records — Where maintained and members' inspection rights )

Oregon-specific provisions to consider:

• Fiduciary duty modifications — the Oregon LLC Act (ORS Chapter 63) allows restriction (but not total elimination) of fiduciary duties. If you want members to have outside business interests, address this explicitly.
• Charging order provisions — Under the Oregon LLC Act (ORS Chapter 63), a judgment creditor of a member is limited to the rights of an assignee. Your agreement should address what happens if a charging order is obtained against a member's interest.
• Assumed business names — If your LLC operates under an assumed business name (Oregon's version of a DBA), note this in the agreement and reference the county-level registration.

How It Relates to Formation

The operating agreement is not filed with the Oregon Secretary of State — it's a private document kept in your LLC's records. However, you should create it immediately after filing your Articles of Organization because:

• Banks often request it when opening business accounts
• It establishes member relationships from day one
• Disputes that arise before an agreement exists are governed entirely by ORS defaults
• Investors and partners will want to see it before joining your LLC

Single-Member LLCs Still Need One

Even single-member LLCs benefit from an operating agreement in Oregon:

• Documents the separation between owner and entity (strengthens liability protection)
• Required by many banks to open a business account
• Establishes procedures if you later add members
• Courts look at operating agreements as evidence that the LLC is a legitimate separate entity (relevant to "veil piercing" claims)

Cost

• DIY (template): available as a separate service
• Attorney-drafted (Oregon-specific): $500-$2,500 depending on complexity
• Filing with the state: Not required — the operating agreement is never filed with the Secretary of State

FAQ

Is an operating agreement required in Oregon?

No. Oregon does not legally mandate a written operating agreement. However, without one, ORS Chapter 63 default rules govern your LLC — including equal profit sharing regardless of capital contribution and unanimous consent requirements for major decisions.

Can I create an operating agreement after my LLC is already formed?

Yes. You can adopt an operating agreement at any time. However, if disputes arise before adoption, ORS Chapter 63 defaults apply to that period. Best practice is to adopt it immediately after receiving your filed Articles of Organization.

Does my operating agreement need to be notarized?

No. Oregon does not require notarization of operating agreements. All members should sign and date it, and each member should retain a copy.

Can the operating agreement be changed later?

Yes. The operating agreement itself should specify how amendments are made (e.g., majority vote, unanimous consent). If it's silent on amendments, the Oregon LLC Act (ORS Chapter 63) and general contract principles govern.