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LLC OPERATING AGREEMENT

This Limited Liability Company Operating Agreement (the "Agreement") is entered into on (the "Effective Date"), by and among the following members (collectively, the "Members"):

The Member(s):

Member 1:
Name:
Address:

Add Second Member

Add Third Member

Add Fourth Member

The Members agree to form and operate a limited liability company (the "Company") under the laws of the State specified below, and agree to the following terms and conditions:

I. COMPANY FORMATION AND DETAILS

1.1. Name.
The name of the Company shall be:

1.2. State of Formation.
The Company is organized under the laws of the State of: (the "State").

1.3. Principal Place of Business.
The principal office and place of business of the Company shall be located at:

1.4. Registered Agent.
The name and address of the Company's Registered Agent for service of process in the State shall be:
Name:
Address:

1.5. Term.
The term of the Company shall commence upon the filing of the Articles of Organization (or Certificate of Formation) with the State and shall continue (check one):

Perpetually

Until a Fixed Date

Until Dissolved

1.6. Business Purpose.
The primary business and purpose of the Company is:

II. CAPITAL CONTRIBUTIONS

2.1. Initial Contributions.
The Members have made the following initial capital contributions to the Company in exchange for their respective Percentage Interests as set forth in "Exhibit A" attached hereto.

2.2. Additional Contributions.
No Member shall be obligated to make any additional capital contributions to the Company unless unanimously agreed upon by all Members.

2.3. No Interest on Capital.
No interest shall be paid on any capital contribution to the Company.

2.4. Return of Capital Contributions.
Except as otherwise provided in this Agreement, no Member shall have the right to demand or receive the return of their capital contribution.

III. ALLOCATIONS AND DISTRIBUTIONS

3.1. Allocation of Profits and Losses.
Net profits and net losses of the Company shall be allocated to the Members in proportion to their Percentage Interests as set forth in Exhibit A.

3.2. Distributions.
Distributions of Net Cash Flow shall be made to the Members at such times and in such amounts as determined by the Management. All distributions shall be made to the Members in proportion to their Percentage Interests.

IV. MANAGEMENT

4.1. Management Structure.
The Company shall be managed by (check one):

Member-Managed

Manager-Managed

4.2. Authority.
The Management (whether Members or Managers) shall have the full power and authority to manage the business and affairs of the Company, including but not limited to:
(a) Executing contracts, agreements, and other instruments;
(b) Opening and maintaining bank accounts;
(c) Employing agents, employees, and independent contractors;
(d) Acquiring, holding, and disposing of real or personal property.

4.3. Limitations on Authority.
Notwithstanding the foregoing, the following actions require the unanimous written consent of all Members:
(a) Amending this Agreement or the Articles of Organization;
(b) Admitting a new Member;
(c) Selling all or substantially all of the Company's assets;
(d) Merging or dissolving the Company;
(e) Filing for bankruptcy.

V. MEMBERSHIP

5.1. Meetings.
Meetings of the Members may be called by any Member holding at least percent of the Percentage Interests. Notice of any meeting shall be given to all Members at least days prior to the meeting.

5.2. Voting.
Except as otherwise provided in this Agreement, all matters requiring the vote of the Members shall be decided by a vote of the Members holding a majority of the Percentage Interests.

5.3. Withdrawal.
A Member may withdraw from the Company only upon terms and conditions agreed to by the remaining Members.

VI. TRANSFER OF INTERESTS

6.1. Restrictions on Transfer.
No Member may sell, assign, transfer, pledge, or encumber any portion of their Membership Interest in the Company without the prior written consent of all other Members.

6.2. Right of First Refusal.
If a Member receives a bona fide offer to purchase their Membership Interest, they must first offer to sell such interest to the Company or the other Members on the same terms and conditions. The Company and the other Members shall have thirty (30) days to exercise this right.

6.3. Death or Incompetence.
Upon the death or legal incompetence of a Member, their executor, administrator, guardian, or other legal representative shall have all the rights of a Member for the purpose of settling the Member's estate or administering their property, but shall not become a Member of the Company unless admitted in accordance with Section 4.3.

VII. DISSOLUTION AND LIQUIDATION

7.1. Events of Dissolution.
The Company shall be dissolved and its affairs wound up upon the occurrence of any of the following events:
(a) The expiration of the Term, if any;
(b) The unanimous written consent of all Members;
(c) The entry of a decree of judicial dissolution;
(d) The sale of all or substantially all of the Company's assets.

7.2. Liquidation.
Upon dissolution, the Company's assets shall be liquidated, and the proceeds shall be applied in the following order:
(a) To the payment of all debts and liabilities of the Company, including debts owed to Members;
(b) To the setting up of any reserves deemed necessary for contingent liabilities;
(c) To the Members in proportion to their positive Capital Account balances;
(d) To the Members in proportion to their Percentage Interests.

VIII. INDEMNIFICATION

8.1. Indemnification.
The Company shall indemnify, defend, and hold harmless any Member or Manager from and against any and all claims, demands, liabilities, costs, damages, and causes of action of any nature whatsoever, arising out of or incidental to any act performed or omitted to be performed by them in connection with the business of the Company, provided such act or omission was not attributable to fraud, gross negligence, or willful misconduct.

IX. GENERAL PROVISIONS

9.1. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of the State of .

9.2. Entire Agreement.
This Agreement constitutes the entire agreement among the Members with respect to the subject matter hereof and supersedes all prior agreements, understandings, and negotiations, whether written or oral.

9.3. Severability.
If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

9.4. Amendment.
This Agreement may be amended or modified only by a written instrument executed by all Members.

9.5. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the Members and their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns.

IN WITNESS WHEREOF, the Members have executed this Operating Agreement as of the date first written above.

MEMBER
Signature: _________________________
Print Name: _______________
Date:

Include Notary Public Section?

EXHIBIT A

MEMBERS AND CAPITAL CONTRIBUTIONS

Member 1: _______________
Capital Contribution: $
Percentage Interest: %

TOTAL PERCENTAGE INTEREST: %

What is a LLC Operating Agreement?

A LLC Operating Agreement functions as a primary internal legal document used by Limited Liability Companies to outline the business's financial and functional decisions including rules, regulations, and provisions. The purpose of the document involves governing the internal operations of the business in a way that suits the specific needs of the business owners, known as members. Once signed by the members, it acts as an official contract binding them to its terms and overrides default state rules that would otherwise govern the entity.

Types of LLC Operating Agreements

Operating agreements vary based on the number of members and the chosen management structure of the company:

Single-Member Operating Agreement - Establishes the business as a separate legal entity from the sole owner, which proves essential for maintaining liability protection and opening business bank accounts.
Multi-Member Operating Agreement - Governs companies with two or more owners by defining ownership percentages, voting rights, and profit distribution methods to prevent internal disputes.
Member-Managed Operating Agreement - Outlines a structure where all owners participate directly in the daily operations and decision-making processes of the company.
Manager-Managed Operating Agreement - Designates one or more specific managers, who may or may not be members, to handle daily operations while other members act as passive investors.

Key Provisions and Clauses

A comprehensive agreement typically includes specific sections to ensure clarity in business operations:

Capital Contributions - Details the initial amount of money or assets each member invests into the business.
Percentage of Ownership - Specifies the equity stake held by each member, often based on their capital contributions.
Distributive Shares - Defines how profits and losses are allocated among members, which may differ from ownership percentages.
Voting Rights and Procedures - Establishes how decisions are made, including whether voting power corresponds to ownership interest or follows a per-capita system.
Transfer of Interest Restrictions - Sets rules regarding how a member can sell or transfer their ownership stake to third parties.
Dissolution Terms - Outlines the specific events or procedures that will trigger the winding up and closing of the business.

Legal Framework and Statutory Requirements

State and federal laws provide the regulatory backdrop for these agreements:

Revised Uniform Limited Liability Company Act (RULLCA) - Provides default rules for LLC governance in states that have adopted this model legislation (Uniform Law Commission, 2006/2013).
New York Operating Agreement Mandate - Requires members to adopt a written operating agreement within 90 days of filing the Articles of Organization (NY LLC Law § 417).
Missouri Operating Agreement Requirement - Mandates that all LLCs adopt an operating agreement to govern the conduct of business (Mo. Rev. Stat. § 347.081).
Delaware Freedom of Contract - Grants broad flexibility for members to structure their agreement and modify default fiduciary duties (Del. Code Ann. tit. 6, § 18-1101).
California Record Keeping - Requires LLCs to maintain a copy of the operating agreement at the designated office (Cal. Corp. Code § 17701.13).
IRS Check-the-Box Regulations - Allows eligible entities to elect their classification for federal tax purposes regardless of their state law status (26 CFR § 301.7701-3).

Articles of Organization vs. Operating Agreement

These two documents serve distinct functions within the formation and management of a limited liability company:

Public Filing vs. Private Contract - The Articles of Organization must be filed with the state government to create the entity, while the Operating Agreement remains a private internal document.
Scope of Content - Articles of Organization contain basic information like the business name and registered agent, whereas the Operating Agreement details complex operational rules and member relations.
Amendment Process - Changing the Articles typically requires filing forms and paying fees to the state, while amending the Operating Agreement usually requires only a vote by the members.

How to Execute a LLC Operating Agreement

Step 1: Draft the Agreement - Members collaborate to write the terms or utilize a template that aligns with state statutes.

Step 2: Review with Legal Counsel - Parties often consult attorneys to ensure the provisions do not violate mandatory state laws or tax regulations.

Step 3: Sign the Document - All members must sign the agreement to validate their acceptance of the terms and conditions.

Step 4: Store Safely - The executed document resides with the company records and does not get filed with any government agency.

FAQs

While most states do not legally mandate an operating agreement, jurisdictions such as New York, Missouri, Maine, California, and Delaware have statutes requiring or strongly implying the necessity of one. Even where not mandatory, financial institutions often require this document to open business bank accounts.

No, the operating agreement is an internal document kept with your business records. You generally do not file it with the Secretary of State or any other government agency, unlike the Articles of Organization.

Yes, the agreement can be amended at any time, provided the members follow the amendment procedures outlined within the original document itself. Amendments usually require a majority or unanimous vote of the members.

Yes, a single-member LLC benefits significantly from an operating agreement. It provides proof of separation between the owner's personal affairs and the business, which is critical for maintaining the corporate veil and limited liability protection.

Without an operating agreement, the LLC is governed by the default laws of the state where it was formed. These default rules may not align with the members' intentions regarding profit distribution, management authority, or dissolution procedures.

Notarization is rarely a legal requirement for an operating agreement to be valid. The signatures of all members are sufficient to make the contract binding, although some businesses choose to notarize the document for additional authentication.

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