LLC Bylaws Example: Everything You Need to Know
LLC bylaws example refers to the internal laws which govern the running of a limited liability company.3 min read
LLC bylaws example refers to the internal laws which govern the running of a limited liability company. The bylaws are usually referred to as the operating agreement, the purpose of which is to establish the responsibilities and rights of the LLC members and set out the LLC’s internal structure and management. This includes when meetings will be held, how decisions will be made, and how new members can be admitted.
What is an LLC Operating Agreement?
Operating agreements function to ensure the smooth running of a company in the face of unexpected challenges. They are not as important for single-member LLCs, since decision making will be in the hands of one person, but in multi-member LLCs where disputes can arise between members, they are highly recommended, since they can forestall disputes before they get started.
Additionally, an operating agreement lets LLC members set out operating rules which best serve their purposes. If an operating agreement is not specified, the company will have to refer to the default rules of the state if a disagreement comes to head, and these rules may not be in the best interest of the company or its members.
Nonetheless, despite the importance of the above and other operating agreement features, having one is not required by law.
What is Included in an LLC Operating Agreement?
An operating agreement should record a great deal of information about the LLC, including:
- The LLC’s name and address.
- The LLC’s management type (manager managed or member managed).
- The certificate of formation (also called articles of organization).
- Registered agent and registered office information.
- What the ownership percentage will be.
- What the LLC’s term of duration will be.
- What the member’s voting rights will be.
- What occurs if a member dies.
- What the LLC’s business purpose is.
- What the initial contribution should be.
- What powers the members and/or manager will have.
- What the management fees will be.
- How losses and profits will be distributed.
- How the company will be run.
- How new members can be added.
- How records will be maintained.
- How finances and accounting will be handled.
- How disputes amongst members will be resolved.
- When regular meetings will be held.
- Who can sign contracts for the LLC.
- If a member can leave the LLC, or if such a member can compete against the LLC afterwards.
Sample LLC Bylaws
As well as including certain essential details, an operating agreement also must lay them out in certain specific ways through a variety of clauses. The language of such clauses might run thus, for example:
- LLC Name: “The name of the LLC is...”
- Registered office address: “The address of the registered office is...”
- Members’ names and addresses: “The name and address of each member is...”
- LLC term of duration: "The company shall continue until ..." or "... in perpetuity."
- LLC purpose: “The purpose of the LLC shall be...”
In addition to this language, some subjects dealt with in the operating agreement might be dealt with in the following ways:
- Registered agent address. When referring to the location of the registered agent, instead of listing the address of the registered office, LLC bylaws may list the address of the registered agent, if they should become incorporated as a foreign LLC in a state in which they don’t have an office.
- Management. An operating agreement should set out how the members will run the company. The clauses pertaining to this should either assign roles to each member individually or indicate that the members propose to bring in professional managers for a manager-managed operation.
- Organizational structure. These clauses should indicate where and when meetings should take place, how the meetings shall be called, what will constitute a majority in the meetings, what the rules for meetings shall be, and how the meetings will be recorded.
- Finances. Since an LLC’s purpose is to make money and distribute it, clauses should detail how profits and losses will be distributed amongst members and what part of the LLC’s cash flow will be reinvested in the company.
These are just some examples of the issues that may arise while dealing with LLC bylaws. If you need help understanding more in regards to LLC bylaws example, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.