An LLC operating agreement are documents that are used by sole proprietors and contributing members of any business in any state, who would elect to establish their standard operating procedures, company policies among other aspects of the business important to the success and smooth operations of businesses of any size. Most states do not require the implementation of the document, however, to protect the personal assets and financial accounts of the member(s) from any level of litigation. The document will also provide tax benefits to those who possess a completed, state filed document.
Table of Contents
Single-Member – For use by entities who will have more than one (1) contributing/managing member.
Multi-Member – To be used by a sole proprietor to organize various aspects of their business and to protect their personal assets.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
To simply put how important an operating agreement is it would be like creating a partnership without a partnership agreement. The operating agreement is the only document that states the ownership interest of each member, each person’s role in the Company, and any other business decisions that are important.
The document is not filed with any government agency. Therefore, each member or individual that is apart of the Company, or is associated with it, shall keep an original copy for themselves.
- AL – § 10A-5A-1.08
- AK – AS 10.50.095
- AZ – § 29-682
- AR – § 4-32-401 to § 4-32-405
- CA – § 17701.01-17701.17
- CO – § 7-80-108
- CT – § Sections 34-100 to 34-299
- DE – § 18-101 to § 18-1109
- FL – § 605.0105
- GA – § 14-11-100 to § 14-11-1109
- HI – § 428-103
- ID – § 30-6-110
- IL – 805 ILCS 180
- IN – IC 23-18-4-4
- IA – § 489.110
- KS – § 17-7662 to § 17-76-146
- KY – § 275.001 to § 275.540
- LA – RS 12:1301 to RS 12:1368
- ME – 31 §1521 to 31 §1524
- MD – § 4A
- MA – Chapter 156C
- MI – Sections 450.4101 to 450.5200
- MN – 322C.0110 to 322C.0112
- MS – § 79-29-123
- MO – § 347.081
- MT – § 35-8-109
- NE – § 21-110
- NV – NRS 86.286
- NH – § 304-C:41
- NJ – § 42:2B-22
- NM – Chapter 53, Article 19
- NY – § 417
- NC – § 57D-2-30
- ND – § 10-32.1-13
- OH – § 10-32.1-13
- OK – § 18-2012.2
- OR – § 63.057
- PA – § 8916
- RI – Chapter 7-16
- SC – § 33-44-103
- SD – § 47-34A-103
- TN – § 48-249-203
- TX – Sec. 101.052
- UT – Title 48, Chapter 3a, Part 1
- VT – 11 V.S.A. § 3003
- VA – § 13.1-1023
- WA – RCW 25.15.018
- WV – § 31B-1-103
- WI – Chapter 183
- WY – § 17-29-110
Name of LLC – This can be found by conducting a search of your LLC’s name in the Secretary of State’s office. After entering the name of your Company it should have the words Limited Liability Company or a State approved abbreviation (most commonly just “LLC”).
State of Jurisdiction – Every LLC is registered within a State and not on the federal level. The only item that is registered at the federal level is when applying for a Tax ID Number (also known as a Federal Employer Identification Number, or “FEIN” and “EIN”).
Single Member – This is for a Company with only one (1) owner. The reason it is important to have this document, even with just a single owner, is that it helps to prove entity status if it was ever questioned by a third (3rd) party. If the court would asked to view this document and it did not exist, it would reflect poorly on the entity and would run the risk of having it’s entity status removed.
Multi-Member – This is for a Company with multiple owners. It should be noted that all of the sections of this document should be looked at very closely as it affects all the members of the entity. Especially the ownership interest and distribution.
Principal Place of Business – This is also known as the “Principal Office Address” where the main functions of the business are located. Also referred to as the “Company Headquarters”.
Formation – This is the Date the Company was formed and within the State name.
Registered Office and Agent – This is the individual that chooses to accept any and all notices from outside parties. The primary contact will most likely be from the State, but if there is any litigation or official legal notices it will be sent to this individual and address. It is recommended to elect having a lawyer assume this position or a person that is a resident of the State the Company is located.
Member Contributions – If any of the Members have personally contributed to the LLC it should be listed here. In addition to cash, if there are any assets (such as vehicles, office furniture, etc.) that was given to the Company it should be mentioned for tax and distribution purposes.
Distributions – A distribution is money that is sent to a member of the LLC that is generated by the revenue of the business This is usually calculated as profit or at a figure after paying most of the Company’s operating expenses.
- The percentage of distribution each Member is entitled to is usually reflected in the percent that the member owns in the LLC. Therefore in the boxes the name(s) of the member(s) should be entered along with their respective percentage interest.
Bank Accounts – The bank account(s) that the Company shall use must have all monies deposited into said account and may only be withdrawn at certain times by the designated Member(s).
Management of the Company – The Company may opt to be managed by a member or by a manager that is selected by the member(s). If the Company chooses to have a Manager, then their role, power(s), and interest in the Company should be mentioned.
Member Meetings – It is required for most entities to meet at least once per year in a location, usually the principal office. Depending on the Company, this annual meeting can be treated more serious than others. In some meetings, the minutes must be written stating the items that were discussed along with votes. All minutes, discussions, votes, and any other decisions made should be recorded and placed on file.
Assignment of Interests – There should be rules setup about the assignment of ownership in the entity.
- For example, most Companies will require a member to offer their share of the ownership of the Company owners before attempting to sell to individuals outside of the Company.
Ownership of Company Property (Single Member) – This is to establish the Company as a separate entity and to state that all assets owned are by the LLC and not under the ownership of the sole member.
Right of First Refusal – To allow the members the option to purchase the interest that is being sold at a predetermined price negotiated between one of the members and an outside party. If the members refuse to purchase for the said price then the outside party shall be permitted to purchase the interest.
Admission of New Members – If at any time there are to be new owners in the Company the existing members may ask for certain information before allowing them to participate in Company functions.
Withdrawal Events – This section lists the ways a member may be able to get out of the Company. This is necessary so that members cannot leave the Company if it begins to bring on debt or if another member attempts to force out others from the LLC. This should be used to protect one another from each other.
Dissolution and Liquidation – The members can list various actions that would allow for the dissolution of the Company and the selling of all its assets.
Representation of Members – A clause that states the Company is, more or less, for investment reasons and is to follow all local, State, and Federal laws.
LLC Certificates – At the option of the members, they may allow themselves to generate certificates that state their interest in the Company. Only applicable if the LLC decides to produce them.
Notices – All communication made to the members shall be sent to the address printed in the operating agreement. All notices are recommended to be completed via Certified Mail.
Amendments – If there are to be amendments or changes to this agreement make sure that there are sufficient hurdles placed to make it so no single party can make edits without the approval of majority or all of the members.
Indemnification – For single member agreements, the section states that any actions by the Company shall hold the sole individual, and any employees or family members, harmless from any actions taken by the Company. This is within reason and if there has been extreme negligence performed by the member they may still be held liable.
Miscellaneous – The last paragraph states that the entire agreement is not bound by any of the terms that may not apply in certain jurisdictions and that if there are any other terms that should be included in the agreement that they should be entered in this area.