Operating Agreement LLC Hawaii

A Hawaii Limited Liability Company (LLC) Operating Agreement is a written contract among members that outlines ownership, management, and internal rules. It serves as the company’s internal rulebook and should be stored with business records. Both single-member and multi-member LLCs are strongly encouraged to create one.

Is an Operating Agreement Required in Hawaii

No. Under Hawaii Revised Statutes §428-103, an Operating Agreement is optional and not required by law. If an LLC does not have one, the default provisions in HRS Chapter 428 will govern operations. These default rules often leave important matters, such as ownership transfers or member departures, unclear or undefined.

Why Every Hawaii LLC Should Have One

A written Operating Agreement offers several important benefits:

• Preserves limited liability: Demonstrates that the LLC operates as a separate legal entity, protecting members’ personal assets.
• Prevents disputes: Defines ownership percentages, voting rights, and profit distribution to avoid misunderstandings among members.
• Allows flexibility: Enables members to customize management, tax treatment, and operational procedures beyond Hawaii’s default laws.
• Ensures continuity: Provides clear buyout, succession, and dissolution processes in case of withdrawal or death.
• Proves authority: Serves as evidence of ownership and management for banks, investors, and regulatory agencies.

Key Sections to Include

A well-drafted Hawaii Operating Agreement typically includes:

• Basic information: LLC name, business purpose, effective date, registered agent, and chosen tax classification.
• Ownership and contributions: Member names, ownership percentages, and initial capital contributions.
• Management and voting: Specifies whether the LLC is member-managed or manager-managed and identifies major decisions requiring unanimous consent.
• Transfers and dissolution: Describes buyout rules, right of first refusal, and winding-up procedures under HRS §428-801.

Creating and Keeping the Agreement

The Operating Agreement is not filed with the Hawaii Department of Commerce and Consumer Affairs (DCCA). It becomes effective once signed by all members and should be kept with the LLC’s records. Having an attorney review the agreement before signing is recommended to ensure compliance and clarity.