Is an operating agreement required in Tennessee?
No — Tennessee does not legally require an operating agreement. But that doesn't mean you should skip it. Without one, Tennessee's default LLC statutes govern your business by default — which often produces results you don't want, especially with multiple members.
What an operating agreement does
- Defines ownership percentages and capital contributions.
- Sets out voting rights, profit/loss distribution, and management structure (member-managed vs manager-managed).
- Specifies what happens on death, divorce, or buyout of a member.
- Establishes the LLC as a real, separate entity — courts use it as evidence against "piercing the corporate veil."
- Lets you override Tennessee's default LLC statutes with your own customized terms.
Cost options in Tennessee
| Source | Cost | Quality |
|---|---|---|
| Free template (Northwest, LegalZoom basic, SCORE) | $0 | OK for single-member, generic. Often missing state-specific clauses. |
| Paid template (Nolo, LegalNature) | $30-$100 | State-customized, more thorough. Good for 1-2 members. |
| Tennessee business attorney | $500-$1,500 | Custom drafted, multi-member, edge-case ready. Recommended for partnerships and high-value LLCs. |
| ZenBusiness / Bizee bundled | $50-$150 | Included with formation packages; quality varies. |
Must-include clauses for Tennessee
- Organization basics: LLC name, principal office, registered agent, formation date, term (perpetual or fixed).
- Members and contributions: who owns what %, what each contributed (cash, services, property).
- Management: member-managed or manager-managed; voting thresholds for major decisions.
- Distributions: how profits and losses allocate; mandatory tax distributions to cover member tax bills.
- Buyout & dissolution: what triggers a buyout (death, divorce, departure); valuation method; right of first refusal.
- Tax election: explicitly state pass-through (default), S-Corp, or C-Corp election.
- Indemnification: LLC indemnifies members/managers against liability for acts in good faith.
- Tennessee-specific: Reference to the Tennessee LLC statute as governing law.
Single-member LLC: do you still need one?
Yes — even though there's nothing to "negotiate" with yourself. The operating agreement is the primary document courts review when deciding whether your LLC is real or a sham (which would let creditors pierce the veil). Single-member LLCs without an operating agreement lose veil-protection cases routinely.
Where to store it
- One signed paper copy in your business files.
- One scanned digital copy in cloud storage.
- Members each get a copy.
- Do not file with Tennessee Secretary of State — keep it private.