The operating agreement: the document this page won't teach you to write

Most states don’t require a written operating agreement. Almost every experienced owner has one anyway, and skipping it usually gets discovered at the worst possible moment.

The scenario that catches solo owners specifically

A sole owner assumes there’s no one to disagree with, right up until they’re incapacitated, even briefly, and a bank or partner asks who has authority to sign while the owner can’t. Without an agreement naming a successor, the honest answer is often nobody.

The insight that undoes this fix if nobody checks it

Naming a successor in the operating agreement is the right instinct, and it is not, by itself, sufficient. That backup person’s actual legal authority to move money or bind the company generally depends on a separately valid power of attorney or authorization instrument that satisfies the bank’s own requirements, not merely a sentence inside the operating agreement. Banks routinely refuse to honor succession language on its own, insisting on their own power of attorney form before releasing control of an account.

The second insight: who decides the owner is actually incapacitated

Even a well-drafted succession clause naming a backup usually triggers on the owner’s “incapacity,” and that word is doing more work than it looks like. Who actually makes that determination, and by what standard, is a question a surprising number of operating agreements never answer at all. A springing power that activates “upon the member’s incapacity” with no named decision-maker, no required medical certification, and no fallback process leaves the exact moment of transition genuinely ambiguous: does a single doctor’s letter suffice, does it require a court’s finding, and who has standing to even request either one for a company with no other members to raise the question. A multi-member company can specify that the other members jointly determine incapacity by some vote or standard; a single-member company, by definition, has nobody else inside the entity to make that call, which is exactly why the answer usually has to come from outside the company entirely, a named physician, a specific court process, or a pre-agreed third party willing to serve that role, spelled out in the document itself rather than left to be improvised by a family member holding an ambiguous clause at the worst possible time.

Why it matters at the moment of formation

Without a written agreement, the state’s own default rules become the company’s operating agreement by default, covered fully in default rules.

What this page will not do

This page won’t walk you through drafting one. That manual, clause by clause, lives at The Rulebook.

What to actually do

Draft the agreement before or immediately after formation. If solo, read the single-member agreement specifically, name a real decision-maker or process for determining incapacity rather than leaving the word undefined, and separately confirm with the bank exactly what instrument it will actually honor.