LLC Operating Agreement Doc: Everything You Need to Know
An LLC operating agreement document is an important contract that details the ownership, members, and structure of an LLC or limited liability company3 min read
An LLC operating agreement document is an important contract that details the ownership, members, and structure of an LLC or limited liability company. It can also name a registered agent, select managers, add or drop members, detail when meetings are held, and provide information for other business operations.
LLCs with one owner should use a single-member LLC operating agreement, and LLCs with multiple owners should use a multi-member LLC operating agreement. Some states, including California, Maine, Delaware, New York, and Missouri, require LLCs to file operating agreements.
Operating Agreements for Multiple Member-Managed LLCs
In a multiple member-managed LLC, multiple members and owners run the day-to-day operations of the company. Disputes are more likely to arise in this organizational structure, and it often comes from members not establishing communication procedures during the early stages of the company. It can be an awkward conversation, but LLC members need to decide what to do when a member wants to leave or if the business fails.
An operating agreement for a multiple member-managed LLC should detail the process of what to do if a member wants to leave the LLC or can no longer fulfill their management responsibilities. Important things to discuss and put in writing are:
- The amount of money each member will contribute to the LLC
- Whether or not those contributions will continue
- If a member can invest an asset besides cash
- The percentage of the company each member owns
- How to handle a member who wants to leave the business
- The process for other members buying out the interest of a member who leaves
- How to value the interest of the departing member
Sample LLC Operating Agreement
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF [NAME OF LLC], LLC
THIS OPERATING AGREEMENT (“Agreement”), is made and entered into as of this __ day of ____, 20__ by [name of LLC], LLC, a LLC State Limited Liability Company (the “Company”), and its Members [names of members].
The Members hereby adopt this agreement as the Operating Agreement of the Company to set forth the rules, regulations, and provisions regarding the management and governance of the Company, how it conducts business, and the rights of its Members.
NOW, THEREFORE, the Members and the Company, intending to be legally bound, hereby agree as follows:
ORGANIZATION AND PURPOSE OF BUSINESS
1.1 Formation. On [date company formed], the Company was formed by filing a Certificate of [type of certificate] with the State Secretary of State under [LLC act for your state].
1.2 Name. The Company's name shall be [name of LLC]. The Company may operate under this name or under any name chosen by the Members. If the Company does business under a name different than what is stated in its Certificate of Formation, it will file a DBA name as required by law.
1.3 Term. The LLC will begin its business on the date the Certificate of Formation is filed and will continue until the Company is dissolved following the process outlined later in this document.
1.4 Principal Office. The principal office for the Company within [state] will be at [principal office address].
1.5 Registered Agent. [Name] will be the registered agent in [state]. The registered agent's office is located at [address].
1.6 Members. The names, addresses, initial contributions, and percentage interest of each Member is designated in Schedule A and can be amended as needed.
1.7 Additional Members. No additional Members will be allowed to join the Company unless there is unanimous written approval from all Members.
1.8 Business Purpose. The Company's purpose is to perform any acts for which it is lawful for an LLC to participate in [state].
2.1 Capital Contributions. Capital Contributions are the money, services, or property given to the LLC in return for a percentage of ownership in the Company.
2.2 Initial Capital Contributions. Member capital contributions are outlined in Schedule A.
2.3 Additional Capital Contributions. Members will make capital contributions according to their ownership percentage in the Company. If the Company must reimburse contributions to the Member, it will be done in proportion to the Member's percentage interest. In this case, capital contributions refer to money and property given to the company, but not time spent by a Member.
If you need help with your LLC operating agreement document, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.