An operating agreement is the governing document of a limited liability company (LLC). For private funds structured as LLCs rather than limited partnerships, the operating agreement serves the same function as an LPA.
Why It Matters
If your fund or GP entity is an LLC, the operating agreement defines member rights, management authority, economic terms, and dissolution procedures. Without one, your LLC defaults to state statute provisions, which rarely match what fund managers intend. Every LLC in your fund structure needs its own operating agreement tailored to that entity's role.
Key Details
- Required for all LLCs used in fund structures: the GP LLC, the management company LLC, and any fund vehicle formed as an LLC.
- Defines whether the LLC is manager-managed (typical for fund vehicles and GP entities) or member-managed (less common in fund structures).
- Specifies distribution and allocation rules, including how profits and losses flow to members and the order of distribution priority.
- Can restrict transfer of membership interests, requiring manager consent or right of first refusal before any transfer.
For a deeper look at how LLCs fit into fund formation, see the Fund Formation and Structure Guide.
Capital Company administers LLC-structured funds and GP entities, including member accounting, distribution calculations, and K-1 preparation according to operating agreement terms.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.