Two friends start a concrete company in Westfield, form an LLC through the state’s online filing system, and agree to split ownership evenly. For several years, the informal arrangement works. Then one owner wants to retire, or wants to bring a son into the business, or dies, and the questions the owners did not address in writing need answers. An LLC operating agreement in Indiana is the document that answers those questions before they become disputes.
Trust between co-owners is valuable, but it does not resolve a disagreement about money. The people who eventually rely on the agreement are often people who were not part of the original conversation, such as a spouse, an heir, a buyer, or a new partner. Without a written agreement, those people may have no reliable way to know what the founders intended.
Does an Indiana LLC need an operating agreement?
Indiana does not require a written operating agreement, and its statute recognizes oral agreements among members. Several important options, though, including changing the members’ fiduciary duties and setting the vote needed to dissolve the company, work only through a written agreement. Without one, owners are left with the statute’s default rules and whatever they can prove was agreed orally.
The state filing that creates an Indiana LLC, the articles of organization, is short. It covers basic information such as the company’s name and registered agent, and it does not address how the owners will divide profits, make decisions, or handle a buyout. Those terms belong in the operating agreement, which is kept with the company’s records rather than filed with the Secretary of State.
What happens if your Indiana LLC does not have a written operating agreement?
Indiana’s LLC statute allows members to use an operating agreement to regulate nearly any aspect of the company’s affairs. The statute specifically mentions how the company will be managed, how members will share distributions and profits and losses, whether members may transfer their interests, whether classes of members will have different voting rights, when someone who receives a member’s interest may become a member, and how the agreement itself may be amended. When the members do not address those terms in writing, the statute’s default rules apply, along with whatever oral understanding the members can prove, and the default rules may not reflect what the owners intended.
Dissolution shows how the default rules can surprise owners. For an Indiana LLC formed after June 30, 2013, the statute generally requires the unanimous consent of the members to dissolve the company voluntarily, unless a written operating agreement permits dissolution by a smaller vote. In a two-owner company, that means either owner can prevent a voluntary dissolution, which can leave the other owner seeking relief from a court. A written agreement can set a different threshold, and it can also establish a buyout process so that one owner can leave without ending the business.
Other options are available only in a written agreement. Indiana’s statute allows a written operating agreement to modify, limit, or eliminate the duties members and managers owe, including fiduciary duties, and to provide for indemnification of a member or manager who is named in a lawsuit because of that role. A written agreement can also give someone who is not a member, such as a lender, the right to approve specified actions like a merger or a dissolution. Whether limiting fiduciary duties is wise depends on which side of the agreement an owner is on, because a provision that gives a managing owner broad latitude may leave a minority owner with fewer remedies. For that reason, owners whose interests may diverge should understand whom the drafting lawyer represents and consider whether they need their own advice.
A single-member LLC also benefits from a written agreement. When the only member of an Indiana LLC dies and no members remain, the statute generally treats the company as dissolved, but it allows the operating agreement to provide a way for the business to continue if the required steps are taken within ninety days. That provision should be coordinated with the owner’s estate plan, because a family trying to keep a profitable business running after a death may otherwise have fewer options.
An operating agreement also supports the separation between owner and company. An agreement will not protect an owner who mixes personal and business funds, but courts do consider whether a company kept basic records. In a 2026 unpublished memorandum decision involving a Miami County towing business, the Court of Appeals listed the lack of an operating agreement among the missing records it considered when it reversed a trial court’s refusal to pierce the company’s veil.
What should an LLC operating agreement cover for a small business?
Consider a hypothetical Fishers HVAC company with three owners and eighteen employees. One owner, the licensed technician who started the business, plans to retire in a few years and wants to be paid out over time. Another wants to bring his daughter into the company, and the third has contributed little to the work for the past year. A well-drafted operating agreement would already address what each owner’s interest is worth, how and when a departing owner is paid, whether a family member can become an owner without the others’ consent, and what the remaining owners may do about an owner who stops contributing.
An agreement for a small business should address ownership percentages and each owner’s contributions, along with what happens if the company needs more capital later. It should identify who handles day-to-day decisions and which major decisions, such as borrowing, selling the business, or admitting a new owner, require a larger vote. Distributions also deserve attention. For LLCs taxed as partnerships, members generally owe income tax on their share of the company’s profit whether or not the company distributes that profit, so the agreement should address whether the company will distribute enough cash to cover those taxes, and the owners’ CPA should be part of that discussion.
Buyout provisions tend to matter most when circumstances change. A well-drafted agreement identifies the events that trigger a buyout, such as death, disability, divorce, retirement, or an owner’s decision to leave, and it establishes a method for valuing the departing owner’s interest and a schedule for payment. It also restricts transfers so that an ownership interest does not pass to someone the other owners did not agree to work with. Indiana courts generally enforce clearly written terms as written. In a Marion County case involving a heart hospital organized as an LLC, the governing agreements specified both the event that required the company to redeem a physician-owner’s interest and the formula for the price, and our Supreme Court enforced the redemption requirement according to the agreement’s plain language. The parties still litigated the meaning of the agreement’s wording, which illustrates that careful drafting matters as much as having an agreement.
Templates are widely available, and Indiana law does not prohibit using one. A template is not drafted for a particular business, however, and it may not reflect the deal the owners made or the provisions Indiana’s statute requires to be in writing. Buyout, valuation, and voting terms are the provisions most worth tailoring, because they determine who controls the company and who gets paid, how much, and when.
When should you talk to a lawyer about your operating agreement?
Formation is the most efficient time to address these terms, because the owners are negotiating before any dispute has arisen. If your LLC has operated for years without a written agreement, it makes sense to put one in place now, before a retirement, death, divorce, or dispute between owners turns a business discussion into a negotiation under pressure. An existing agreement should also be reviewed when the company admits a new owner, brings a family member into the business, buys out an owner, or discovers that its agreement is a template no one read closely.
Forming the company also brings ongoing filing obligations. Indiana requires LLCs to file periodic business entity reports with the Secretary of State, and the federal reporting requirements under the Corporate Transparency Act, which we covered in 2024, have changed substantially since then. Our business law practice assists owners with forming LLCs, drafting and updating operating agreements, and resolving disputes among owners.
Whether you are starting a business with a friend, bringing family into an established company, or working through a disagreement with a co-owner, Fugate Gangstad Lowe can help you put clear terms in writing. We represent business owners in Indianapolis, Fishers, Carmel, Noblesville, and throughout central Indiana in business formation, contract drafting, and business disputes. Call us at 317-829-6797 or reach out through our contact form to schedule a time to talk.
Frequently asked questions about LLC operating agreements in Indiana.
Is an operating agreement required for an LLC in Indiana?
Indiana does not require an LLC to have a written operating agreement, and its statute defines an operating agreement to include an oral agreement among the members. The state filing that forms the company does not include one. Several important provisions, including changes to the members’ fiduciary duties and a dissolution vote below unanimous consent, take effect only in a written agreement. For a company with more than one owner, operating without a written agreement leaves significant questions unresolved.
What happens if my LLC doesn’t have an operating agreement?
Indiana’s statute provides default rules for matters the members did not address, and any oral understanding among the members may also come into play. The default rules can produce results the owners did not intend, such as requiring unanimous consent to dissolve a company formed after June 30, 2013. Oral understandings are also difficult to prove when the owners remember them differently. A written agreement records the terms before anyone has a reason to remember them in their own favor.
Can an operating agreement be verbal in Indiana?
Indiana’s statute allows it, defining an operating agreement as a written or oral agreement of the members about the company’s affairs and the conduct of its business. Some of the most useful provisions, however, are available only in a written agreement. An oral agreement is also difficult to prove if the members later disagree about what was said.
Does a single-member LLC need an operating agreement?
It is not required, but it can be valuable. Indiana’s statute allows the operating agreement to provide a way for a single-member LLC to continue after the member’s death, which can matter a great deal to a family that wants to keep the business running. A written agreement is also part of the company’s records, which supports the separation between the owner and the business. A single-member agreement can be fairly short and still address the issues that matter most.
How do you remove a member from an LLC in Indiana?
The answer depends heavily on the operating agreement. A well-drafted agreement can identify the circumstances that allow the company to buy out or remove an owner and the price that owner receives. If the agreement is silent, or there is no written agreement, the options may be narrower and harder to predict. Talk to a business lawyer before taking action against a co-owner, because a misstep can create claims against you.
What happens to an LLC when a member dies in Indiana?
For a single-member LLC, Indiana’s statute generally treats the company as dissolved if no members remain, but the operating agreement can provide a way for the business to continue if the required steps are taken within ninety days. For a company with several owners, what happens to the deceased owner’s interest depends largely on the operating agreement. A buyout provision, funded by life insurance or paid over time, can give the family a defined price and payment terms while the remaining owners continue the business. Without one, the surviving owners and the family may have to negotiate terms at a difficult time.
Do I file my operating agreement with the Indiana Secretary of State?
The operating agreement is not filed with the state, because it is an internal document kept with the company’s records. Indiana does require an LLC to keep certain records at its principal office. Keep a signed copy of the agreement and any amendments where they can be located, because they matter most when something has gone wrong.
Can we change our operating agreement later?
You can, and Indiana’s statute allows the members to set the method for amending the agreement in the agreement itself. If your agreement does not address amendments, or you are unsure how to make a valid change, talk to a lawyer before signing anything new. An amendment that is not properly adopted can create the same uncertainty the agreement was meant to prevent.
The information provided in this article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. For legal advice tailored to your situation, please contact our firm directly.