Member Managed LLC Operating Agreement Template: Everything You Need to Know
A member-managed LLC operating agreement template is the best way to detail how your limited liability company will be run on a day-to-day basis.3 min read
2. Member-Managed LLCs
3. LLC Operating Agreements
4. Member-Managed LLCs vs. Manager-Managed LLCs
5. Drafting an Operating Agreement for a Member-Managed LLC
6. Multiple-Member Operating Agreement Template
7. What is a Multi-Member LLC?
8. Using a Multiple-Member LLC Operating Agreement
Limited Liability Company (LLC)
A member-managed LLC operating agreement template is the best way to detail how your limited liability company will be run on a day-to-day basis. An LLC is a business structure commonly used by small businesses. Although there are a variety of benefits to forming an LLC, the main advantage is flexibility. For instance, where corporations are required to appoint a board of directors, LLC owners can run their companies however they choose.
When an individual files Articles of Organization with his or her state, an LLC is formed. This individual, known as the organizer, will usually be required to state whether the LLC being formed will be manager- or member-managed. An LLC manager is an employee of the company, and an LLC member is the owner.
LLC Operating Agreements
An LLC operating agreement is a contract describing a company's operations that the members of the LLC all agree to. In addition to describing operations, an operating agreement can outline how profits and losses will be divided and the process for removing or adding members. An LLC agreement should also include steps for LLC dissolution and asset liquidation. A typical operating agreement will state the LLC managers' and members' responsibilities.
Member-Managed LLCs vs. Manager-Managed LLCs
In a member-managed LLC, company members will be responsible for making all business decisions. In a manager-managed LLC, a manager or team of managers will handle all business operations and decisions, which could include:
- Making sales
- Purchasing inventory
- Entering into contracts
However, in a manager-managed LLC, a member vote is still usually required for making major decisions such as selling or dissolving the business. With a member-managed LLC, every decision must be put to a vote, which can be difficult for larger companies.
Drafting an Operating Agreement for a Member-Managed LLC
Scheduling and conducting member votes for business decisions can take time and effort, which is why it's crucial for member-managed LLCs to establish a process for streamlining decision-making. With an operating agreement, LLC members can decide which type of business decisions must be put to a vote and which can be made by a member-manager. A member-managed LLC's operating agreement should also detail which LLC members are allowed to make certain decisions without needing to consult the other owners.
Multiple-Member Operating Agreement Template
You can use a member-managed LLC operating agreement template to develop an operating agreement for a company with multiple owners. Writing a multiple-member operating agreement is very important because it will describe ownership percentages for each LLC member.
Once the operating agreement has been completed, all members should sign the document in the presence of a notary public, and every member should receive a copy of the agreement. However, an original copy of the operating agreement should be stored at the principal address of the LLC.
What is a Multi-Member LLC?
When forming an LLC, the company can be owned by a single person, multiple people, or even another LLC. As you might expect from its name, a multiple-member LLC is a limited liability company owned by more than one person. The number of members an LLC can have is unlimited, which means your multiple-member LLC could have as few as two members or it could be owned by dozens of people. Owners choose to form multiple-member LLCs for many reasons.
For starters, an LLC provides personal liability protections that aren't available with partnerships or sole proprietorships. In addition, forming an LLC provides a company with a level of legitimacy other business structures don't offer. LLCs also provide much more attractive tax rates and aren't regulated as tightly as other businesses.
Using a Multiple-Member LLC Operating Agreement
Generally, states do not require LLCs to possess an operating agreement. However, if you want your LLC to succeed, writing an operating agreement is an important step. Without an operating agreement, you will not be able to define the rules for operating or owning your company.
Some of the information you might add to your operating agreement includes:
- Management rules for your LLC
- Provisions for buying or selling the company
- Member ownership percentages
- Member responsibilities
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