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The short answer
An operating agreement is the private contract that sets who owns what in an LLC, who decides, how money comes out and what happens when a member dies or wants to leave. When relatives living in Nigeria are members, the clauses that matter most are capital and ownership percentages, manager authority, distributions and tax payments, transfer and buyout rules, succession, and who acts as the responsible party with the IRS. A family LLC with two or more members is taxed as a partnership by default, and members who are nonresident aliens rule out an S corporation election.
Many Nigerian families abroad pool money for a rental property, a logistics business or a shop, and put it in a US LLC with a brother in Houston, a mother in Enugu and a cousin in Lagos as members. The state certificate that forms the LLC says almost nothing about how the family will work together. That job belongs to the operating agreement. Most disputes in family companies are not about fraud. They are about assumptions nobody wrote down: whether Mummy's share can pass to one child, whether profits must be paid out every year, who can sign a lease.
What changes when members live in Nigeria
Three facts shape the agreement once some owners are outside the US.
- Federal tax classification. The IRS says a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it elects to be taxed as a corporation on Form 8832 (IRS LLC page, reviewed 10 October 2026). Each member then has a share of profit to account for, whether or not cash is paid out.
- No S corporation option. The IRS instructions for Form 2553 (reviewed 30 April 2026) list nonresident alien shareholders as not allowed. A relative living in Nigeria who is not a US citizen or US tax resident would normally be a nonresident alien, so the family should not plan around S corporation savings. See our guide to Form 2553 and the S corp election.
- Distance. Members who cannot sign in person, cannot get to a US bank branch and may be in a different time zone need clear rules for written consent, electronic signatures and notice.
The clauses that matter most
1. Capital, units and percentages
Record what each member put in, in dollars, on what date, and what percentage or number of units it bought. Where money was sent from Nigeria in naira, record the dollar amount that actually arrived, not the naira amount sent. State whether future contributions are required, and what happens to a member's percentage if they do not contribute when asked (dilution, a loan from the others, or nothing).
2. Member-managed or manager-managed
In a member-managed LLC every member can usually act for the company. That is risky when members are far apart and may not see documents. Many diaspora families choose manager-managed, naming the member in the US as manager, and list decisions that still need a member vote: selling the main asset, borrowing above a set figure, admitting a new member, changing the business.
3. Distributions and tax money
Because partnership profit is taxed to members whether or not it is paid out, a common clause requires a minimum "tax distribution" each year so members can pay tax on their share. Also set out the order of payments when the business is sold: debts first, then return of capital, then profit by percentage.
4. Transfers, buyouts and death
Decide whether a member may sell or give units to an outsider, or only to the other members first (a right of first refusal). Say how units are valued for a buyout, for example by an independent valuation or a formula. For death, say whether units pass to the heir as a full member or only as a right to distributions. This matters in families where inheritance under Nigerian customary law or a Nigerian will may point somewhere different from what the US members expect.
5. Signatures, notices and meetings
Allow electronic signatures and consent by email or a named messaging channel, set notice periods that work across time zones, and name an address for each member. Keep a register of members with current addresses.
6. Disputes
Choose the governing law (usually the state of formation), the forum, and whether disputes go to mediation first. Without this, a relative in Lagos and a relative in Atlanta may each start proceedings at home.
The IRS responsible party and record-keeping
When the LLC applies for an EIN on Form SS-4, it names a responsible party: the person who ultimately owns or controls the entity or exercises effective control over its funds and assets. The SS-4 instructions (Rev. December 2025) say a change of responsible party must be reported within 60 days on Form 8822-B. The agreement should say who that person is and require them to hand over the role, and the records, if they stop being manager.
On federal beneficial ownership reporting, FinCEN's page (updated 11 August 2026) says US companies are exempt from BOI reporting under the final rule that took effect on 14 August 2026. That removes one filing, but banks and payment providers will still ask who the owners are. See BOI reporting for a US LLC now.
Example: a three-sibling property LLC
Example only. Ada (Maryland) puts in $60,000, her brother Chidi (Abuja) $30,000 and their sister Ngozi (Lagos) $10,000. Their agreement records 60%, 30% and 10%, names Ada as manager, and says any sale or borrowing above $25,000 needs members holding 75%. Ada alone (60%) cannot sell; Ada plus Chidi (90%) can. If the LLC makes $20,000 profit in a year, the shares are $12,000, $6,000 and $2,000, and the tax-distribution clause sets how much cash each receives toward tax on that share. The figures add to $20,000.
What to check first
- Confirm the state where the LLC is formed and read its LLC law's default rules: they apply wherever the agreement is silent.
- Agree percentages from money actually received, in dollars.
- Choose manager-managed or member-managed and list the reserved decisions.
- Write the transfer, buyout and death clauses before anyone is ill or angry.
- Have a US lawyer licensed in the state of formation review it; take Nigerian advice on any inheritance or tax point for members at home.
Where Pryme fits
Once the family has agreed how money moves, the members in Nigeria need somewhere to receive distributions. A Pryme account can be opened from any country and holds USD and NGN with local details for each, so a member can keep a dollar distribution in dollars and use Swap only when they choose; the app shows the rate and the fee before you approve. For the LLC itself, see the business multicurrency account.
Questions people ask
Do I need an operating agreement if my family LLC is small?
State law fills the gaps when there is no agreement, and those default rules may not match what your family intended. A written agreement is the only reliable record of who owns what and who decides.
Can my mother in Nigeria be a member of my US LLC?
Yes, an LLC can have members living outside the US. The practical effects are tax reporting for her share of profit and the loss of the S corporation option, because nonresident alien shareholders are not allowed under the Form 2553 rules.
How is a family LLC taxed by the IRS?
A domestic LLC with two or more members is treated as a partnership by default unless it elects corporate treatment on Form 8832, according to the IRS LLC page.
Who should be the responsible party on the EIN?
The person who ultimately owns or controls the LLC or its funds. If that changes, Form 8822-B is due within 60 days, according to the SS-4 instructions.
Sources
- IRS: Limited liability company (LLC) (reviewed 10 Oct 2026) · accessed Oct 2026
- IRS: Instructions for Form 2553 (Rev. December 2020, page reviewed 30 Apr 2026) · accessed Oct 2026
- IRS: Instructions for Form SS-4 (Rev. December 2025, page reviewed 30 Apr 2026) · accessed Oct 2026
- FinCEN: Beneficial ownership information reporting (updated 11 Aug 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.