What is the difference between member-managed and manager-managed?

In a member-managed LLC, all owners share day-to-day authority to run and bind the company. In a manager-managed LLC, the members appoint one or more managers to run the business while non-manager members act as passive investors. The operating agreement states which structure applies.

Can an Indiana operating agreement be oral?

The Business Flexibility Act recognizes written or oral operating agreements, but an oral agreement is difficult to prove and enforce. A signed written agreement is standard practice and is what banks, courts, and co-owners will expect, so put it in writing.

Indiana Operating Agreement: Requirements & What to Include (2026)

Q: Is an operating agreement required for an Indiana LLC?

No. Indiana law does not require an LLC to adopt an operating agreement, and you never file one with the state. However, the Indiana Business Flexibility Act (IC 23-18) strongly favors having one, because a written agreement overrides the statute's default rules, and banks and investors routinely ask for it.

Q: Do I file my Indiana operating agreement with the Secretary of State?

No. The operating agreement is an internal document. You do not file it with the Indiana Secretary of State or INBiz, and it is not part of the public record. You keep it with your company records and provide copies to members, your bank, and your accountant.

Q: Does a single-member Indiana LLC need an operating agreement?

It is not legally required, but it is strongly recommended. A single-member operating agreement documents that the LLC is separate from you, which helps preserve limited liability, and it is often required to open a business bank account or prove ownership to lenders.

Q: What does the Indiana Business Flexibility Act say about operating agreements?

The Indiana Business Flexibility Act, codified at Indiana Code Article 23-18, defines an operating agreement as a written or oral agreement of the members about the company's affairs and lets it override most statutory defaults. Where the agreement is silent, the Act's default rules apply.

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 6, 2026 · Last updated Aug 6, 2026

Indiana does not legally require an LLC operating agreement, and you never file one with the state. But under the Indiana Business Flexibility Act (Indiana Code 23-18), the operating agreement is the document that overrides the statute's default rules on ownership, voting, and profit splits - so nearly every Indiana LLC should adopt a written one. Where your agreement is silent, the Act's defaults control instead.

Quick Answer

Legally required?: No - Indiana does not require an operating agreement
Filed with the state?: No - it is a private, internal document
Governing law: Indiana Business Flexibility Act, Indiana Code Article 23-18
Form allowed: Written or oral; a signed written agreement is standard
Why it matters: Overrides statutory defaults; needed for banks and liability protection
Applies to: Single-member and multi-member LLCs

Is an Operating Agreement Required in Indiana?

No Indiana statute requires an LLC to have an operating agreement, and there is no penalty for operating without one. Your LLC legally exists once the Secretary of State accepts your Articles of Organization - see how to form an Indiana LLC - whether or not you sign an agreement. In that sense the operating agreement is optional.

In practice, it is close to essential. The Indiana Business Flexibility Act, the state's LLC statute, is built around the operating agreement: it lets the members set their own rules and applies its own default provisions only where the agreement is silent. Without an agreement, your LLC is governed entirely by those statutory defaults, which may not match how you and your co-owners actually intend to run and split the business. Banks, lenders, title companies, and investors also routinely ask to see the operating agreement before opening accounts or closing deals, so the document is a practical necessity even though the state does not mandate it.

Indiana Does Not File Your Operating Agreement

The operating agreement is an internal, private document. You do not submit it to the Indiana Secretary of State, you do not upload it to INBiz, and it never becomes part of the public record. The only documents the state keeps are your Articles of Organization and your biennial Business Entity Report. Because the agreement is private, you control who sees it. Keep the signed original with your company records, give each member a copy, and provide copies to your bank and accountant when asked. This is different from the Articles of Organization, which are public and searchable through the Secretary of State's business search.

What the Indiana Business Flexibility Act Says

Indiana's LLC statute is the Indiana Business Flexibility Act, codified at Indiana Code Article 23-18. It defines an "operating agreement" broadly as any written or oral agreement of the members concerning the affairs of the LLC and the conduct of its business that binds all the members. The Act is intentionally flexible: it lets members contract for the governance, economics, and management structure they want, and its own rules step in only as gap- fillers where the agreement does not address a topic.

That flexibility is broad. Indiana permits a written operating agreement to modify or even limit duties among members and managers to a degree many states do not allow, subject to general good-faith expectations recognized by the courts. The Act also requires the LLC to keep copies of its written operating agreements and amendments with its records. Because the statute defers so heavily to the agreement, the choices you write down genuinely control - which is exactly why drafting it carefully matters. You can read the statute directly through the Indiana General Assembly's code.

Statutory Default Rules If You Have No Agreement

If your Indiana LLC has no operating agreement, or the agreement is silent on a point, the Business Flexibility Act's default rules govern. Those defaults determine matters such as how profits and losses are allocated, how the members vote, how new members are admitted, and what happens when a member wants to leave or dies. Statutory defaults are designed to be reasonable general rules, not a fit for every business - for example, they may not reflect an ownership split that differs from capital contributions, or a plan to reinvest rather than distribute profits.

The risk is greatest for multi-member LLCs, where disagreements over money and control are common. Without a written agreement, a dispute is resolved by the statute and the courts rather than by terms you chose in advance. Writing your own operating agreement lets you displace the defaults you dislike and keep the ones you do not care to change.

Member-Managed vs. Manager-Managed

A core decision your operating agreement records is the management structure. In a member-managed LLC - the default assumption for most small businesses - every member shares authority to run the company and bind it in ordinary business. In a manager-managed LLC, the members appoint one or more managers (who may or may not be members) to handle day-to-day operations, while the other members act as passive investors without authority to bind the company. You also indicate the management structure on your Articles of Organization, so the operating agreement should be consistent with what you filed. Choose manager-managed when some owners are purely investors or when you want centralized control; choose member-managed when all owners will be actively involved.

Single-Member vs. Multi-Member Agreements

A single-member LLC has one owner, so there is no one to negotiate with - but an operating agreement still serves a purpose. It documents that the LLC is a separate entity from you personally, which supports the liability separation that is the whole point of forming an LLC, and it is frequently required to open a business bank account or to show a lender who owns the company. See single-member LLC for how the structure is taxed.

A multi-member LLC needs a more detailed agreement because it must resolve questions between co-owners: capital contributions, profit splits, voting thresholds, what happens if a member wants out, and how to break a deadlock. The more owners and the more money involved, the more important a carefully drafted, signed agreement becomes.

What to Include in an Indiana Operating Agreement

There is no state-mandated form, but a thorough Indiana operating agreement typically covers the clauses below. Each addresses a topic the Business Flexibility Act would otherwise fill with a default.

Clause	What it settles
Company basics	LLC name, principal office, registered agent, purpose, formation date
Members and ownership	Each member's name, capital contribution, and percentage interest
Management structure	Member-managed or manager-managed; managers' names and authority
Voting	Voting rights and the thresholds needed for ordinary and major decisions
Profits and distributions	How profits and losses are allocated and when cash is distributed
Transfers and buy-sell	Restrictions on transferring interests; buyout on exit, death, or default
Admission and withdrawal	How new members join and how a member withdraws
Dissolution	Events that trigger winding up and how remaining assets are divided

Once drafted, all members should sign and date the agreement, and each should keep a copy. Amend it by the method the agreement specifies - usually a written amendment approved by the required vote - whenever ownership or management changes. For a general template overview, see LLC operating agreements.

Operating Agreement and Taxes

The operating agreement is a governance document, not a tax election. How your LLC is taxed is set federally with the IRS - a single-member LLC is disregarded by default and a multi-member LLC is taxed as a partnership - as covered in Indiana LLC tax filing. Still, the two interact: your profit-and-loss allocations, distribution rules, and any special allocations in the operating agreement flow through to how income is reported on each member's return. If you plan to elect S-corporation treatment, make sure your agreement's economic terms are consistent with the single-class-of-ownership rules that election requires.

Frequently Asked Questions

Is an operating agreement required for an Indiana LLC?

No. Indiana does not require one and you never file it with the state. But the Business Flexibility Act (IC 23-18) favors having one, because a written agreement overrides the statute's defaults and banks and investors routinely ask for it.

Do I file my Indiana operating agreement with the Secretary of State?

No. It is an internal document. You do not file it with the Secretary of State or INBiz, and it is not public. Keep it with your company records and share copies with members, your bank, and your accountant.

Does a single-member Indiana LLC need one?

Not legally, but it is strongly recommended. It documents that the LLC is separate from you, which helps preserve limited liability, and it is often required to open a business bank account or prove ownership.

What does the Business Flexibility Act say about it?

Indiana Code Article 23-18 defines an operating agreement as a written or oral agreement of the members about the company's affairs and lets it override most statutory defaults. Where it is silent, the Act's defaults apply.

Member-managed or manager-managed - what is the difference?

In a member-managed LLC all owners run and bind the company. In a manager-managed LLC, appointed managers run the business while other members are passive investors. The operating agreement states which structure applies.

Can the agreement be oral?

The Act recognizes written or oral agreements, but an oral one is hard to prove and enforce. A signed written agreement is standard and is what banks, courts, and co-owners expect.

Sources

Indiana General Assembly - Indiana Code Title 23, Business and Other Associations (Article 18, Business Flexibility Act).
Justia - Indiana Code Article 23-18, Limited Liability Companies (operating agreement provisions).
Justia - IC 23-18-1, Definitions ("operating agreement" defined; short title).
Justia - IC 23-18-4, Rights and Duties of Members and Managers (management and duties).
Justia - IC 23-18-5, Contributions and Distributions (allocations and distributions).
Justia - IC 23-18-6, Members (admission, withdrawal, records).
Indiana Secretary of State - Business Services Division (Articles of Organization; documents kept by the state).
Indiana Secretary of State - Business Forms (Articles of Organization; management structure).
INBiz (State of Indiana) - Start a New Business (formation vs. internal agreements).
Indiana Secretary of State - Business Search (public record scope; operating agreement not filed).
IRS - Limited Liability Company (LLC) (default tax classification).
IRS - Single Member Limited Liability Companies (separate entity; liability).
IRS - About Form 2553 (S-corporation election requirements).

LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Statutes and requirements change; verify current Indiana law with the Indiana Code and the Indiana Secretary of State, and consult an attorney before finalizing an operating agreement, before acting.