When starting a single-member Limited Liability Company (SMLLC), one of the most important documents to create is the Operating Agreement (OA). This legally binding document outlines the management structure, ownership, and operating procedures of the LLC. In this blog post, we will discuss the key considerations, structure, and provisions to include in your OA to ensure the best asset protection for your single-member LLC. There is also an SMLLC OA template at the end.
Operating a business as a Limited Liability Company (LLC) offers numerous advantages, including flexibility in management structure, tax benefits, and most importantly, asset protection. An LLC is a legal entity that is separate from its owners, known as members. One of the most crucial documents for an LLC is the Operating Agreement (OA), which outlines the management structure, ownership, and operating procedures of the company. A well-drafted OA is essential for ensuring the best asset protection for your LLC. In this article, we will discuss the importance of an OA in providing limited liability protection, separating personal and business assets, and protecting against creditors.
A. Limited Liability Protection
One of the primary benefits of forming an LLC is the limited liability protection it provides to its members. In general, members of an LLC are not personally liable for the debts and obligations of the company. This means that their personal assets, such as their home, car, or savings, are protected from claims made against the business. Limited liability protection is a crucial aspect of asset protection, as it allows business owners to minimize the financial risks associated with running a company.
An Operating Agreement is essential for establishing and maintaining limited liability protection. While some states do not require an LLC to have an OA, having one in place helps ensure that the company is treated as a separate legal entity, thus upholding the limited liability protection for its members. A well-drafted OA clearly defines the roles and responsibilities of the members, as well as the management structure and decision-making processes within the LLC. By adhering to the terms of the OA and maintaining proper documentation and record-keeping, members can effectively demonstrate the separateness of the company, further solidifying the limited liability protection.
B. Separation of Personal and Business Assets
Separating personal and business assets is crucial for maintaining the limited liability protection offered by an LLC. If personal and business assets become commingled, a court may “pierce the corporate veil,” which means that the court disregards the legal separation between the business and its owner, making the owner personally liable for the company’s debts and obligations.
An Operating Agreement plays a crucial role in maintaining the separation of personal and business assets. The OA should outline the initial capital contributions made by the member(s), as well as any additional contributions or loans provided to the company. It should also specify how the assets of the LLC will be managed, including the process for making distributions to the member(s) and the handling of company profits and losses.
In addition to having a comprehensive OA in place, business owners should also follow best practices for keeping personal and business assets separate. This includes opening a separate business bank account, obtaining a separate tax identification number for the LLC, and maintaining accurate and up-to-date financial records.
C. Protection from Creditors
Another essential aspect of asset protection is shielding the assets of the LLC and its member(s) from potential creditors. Creditors may attempt to collect on a debt owed by the LLC or its member(s) by pursuing a charging order, which allows them to access the member’s distribution rights in the LLC. However, they cannot take control of the LLC or its assets.
A well-drafted Operating Agreement can help protect against creditors by including provisions that limit the rights of creditors to collect on a debt. For example, the OA can include language that restricts the transfer of membership interests or prohibits involuntary transfers. Additionally, the OA can specify that distributions to the member(s) are discretionary, which means that the manager has the authority to decide when and if distributions are made. This can help prevent a creditor from seizing the member’s distribution rights.
Moreover, an Operating Agreement can contain provisions that outline the procedures in the event of a member’s bankruptcy or insolvency. These provisions can help ensure that the LLC’s assets and operations remain protected during such situations. For instance, the OA can stipulate that a member’s bankruptcy does not result in the dissolution of the LLC or trigger an automatic buyout of the member’s interest. This helps maintain the stability of the business and minimizes disruptions that could arise from the financial difficulties of the member.
It is also worth considering the choice of management structure within the Operating Agreement, as this can have an impact on asset protection. As discussed earlier, a Manager-Managed structure, in which the management of the company is separated from its ownership, can provide better protection against creditors. In this structure, a creditor with a charging order cannot take control of the LLC, as the management rights are separated from the member’s distribution rights.
In addition to incorporating these provisions in the Operating Agreement, business owners should also ensure that they adhere to proper corporate formalities and maintain accurate records. This includes holding regular meetings, documenting important decisions, and keeping up-to-date records of the LLC’s activities. By doing so, the member(s) can further demonstrate the separateness of the company and protect their personal assets from creditors’ claims.
In conclusion, having a well-drafted Operating Agreement is vital for maximizing asset protection in an LLC. It provides the foundation for limited liability protection, helps maintain the separation of personal and business assets, and shields the LLC and its member(s) from potential creditors. Business owners should work closely with an attorney to ensure that their Operating Agreement is tailored to their specific needs and complies with applicable laws and regulations. By taking the time to create a comprehensive OA and following best practices, LLC owners can enjoy the benefits of asset protection and minimize the financial risks associated with running a business.
When forming a single-member Limited Liability Company (LLC), one of the most important decisions you will make is the choice of management structure. The management structure you choose can have a significant impact on your LLC’s asset protection and operational efficiency. In this article, we will discuss the two primary management structures for single-member LLCs – Member-Managed and Manager-Managed – and provide guidance on selecting the right structure for your business.
In a Member-Managed single-member LLC, the sole member is responsible for managing the daily operations and decision-making of the business. This structure is more straightforward and less formal than the Manager-Managed structure, as it involves the direct involvement of the member in the management of the company.
In a Manager-Managed single-member LLC, a separate manager or board of managers is appointed to handle the daily operations and decision-making of the business. The manager(s) can be an individual, a group of individuals, or even another legal entity. The member’s role is limited to passive oversight and high-level decision-making, such as appointing or removing managers.
As mentioned earlier, a Manager-Managed structure generally provides better asset protection compared to a Member-Managed structure. This is primarily due to the clearer separation between the member’s personal assets and the LLC’s assets.
In a Manager-Managed LLC, the member does not directly participate in the daily operations and decision-making of the business. Instead, these responsibilities are delegated to the manager(s). This clear separation of roles and responsibilities can help demonstrate the separateness of the LLC as a distinct legal entity, which is essential for maintaining limited liability protection.
Additionally, a Manager-Managed structure can provide enhanced protection against creditors. In the event that a creditor obtains a charging order against the member’s LLC interest, the Manager-Managed structure can help prevent the creditor from taking control of the LLC or its assets. Since management rights are separated from the member’s distribution rights, the creditor cannot force the LLC to make distributions or influence the company’s operations. This can be a significant advantage in terms of asset protection and maintaining the stability of the business.
Despite the benefits of a Manager-Managed structure for asset protection, there are certain situations where a Member-Managed structure may be more appropriate for a single-member LLC. For example, if the member is highly experienced in the industry or has a strong background in managing businesses, a Member-Managed structure could be suitable. In this case, the member’s expertise and experience could outweigh the potential benefits of appointing separate managers.
Additionally, if the LLC operates in a low-risk industry or has limited potential liabilities, a Member-Managed structure might be sufficient to meet the company’s needs. In such cases, the simplicity and reduced administrative burden associated with a Member-Managed structure may be more advantageous than the increased asset protection offered by a Manager-Managed structure.
Finally, some business owners may prefer a Member-Managed structure due to the desire to maintain full control over their company. If retaining decision-making authority and direct involvement in the daily operations of the business is a priority, a Member-Managed structure may be the best option.
When deciding on the appropriate management structure for your single-member LLC, it is essential to consider the unique needs and circumstances of your business. Here are some factors to consider when making your decision:
Ultimately, the choice between a Member-Managed and Manager-Managed structure depends on your specific needs and preferences as a business owner. It is important to carefully weigh the pros and cons of each structure and consult with legal and financial professionals to ensure that your decision aligns with your overall business goals and objectives.
In conclusion, selecting the right management structure for your single-member LLC is a critical decision that can significantly impact your company’s asset protection and operational efficiency. By carefully considering the advantages and disadvantages of Member-Managed and Manager-Managed structures, as well as your unique business needs and circumstances, you can make an informed decision that best supports the success and longevity of your LLC. Always consult with an attorney to ensure that your Operating Agreement and management structure are tailored to your specific needs and compliant with applicable laws and regulations.
An Operating Agreement (OA) is a vital document for any Limited Liability Company (LLC), regardless of its size or structure. It outlines the rights, responsibilities, and decision-making processes within the company and plays a crucial role in establishing and maintaining asset protection. In this section, we will discuss the key provisions to include in your LLC’s OA and provide sample verbiage for each provision.
Clearly define whether your LLC will be Member-Managed or Manager-Managed. This provision establishes the management structure and decision-making authority within the company.
Sample verbiage: “The management of the Company shall be vested in a single manager (“Manager”) who shall be appointed by the Member. The Manager shall have the authority to make decisions on behalf of the Company and manage its day-to-day operations, subject to the limitations set forth in this Agreement.”
Outline the initial capital contributions made by the member(s) and any additional contributions or loans provided to the company.
Sample verbiage: “The initial capital contribution of the Member shall be $10,000, which shall be used for the establishment and operation of the Company. Additional capital contributions may be made by the Member at their discretion, subject to the terms and conditions set forth in this Agreement.”
Specify the manner in which profits, losses, and distributions will be allocated among the member(s). This includes addressing non-pro rata distributions and the discretionary authority of the manager to make distributions.
Sample verbiage: “Profits and losses of the Company shall be allocated to the Member in proportion to their capital account. Distributions to the Member may be made at the discretion of the Manager and shall not be subject to any mandatory or fixed schedule. The Manager may make non-pro rata distributions, as they deem appropriate and in the best interest of the Company.”
Include provisions that limit or restrict the transfer of membership interests to protect the LLC’s assets and maintain its stability.
Sample verbiage: “The Member shall not transfer, assign, or otherwise dispose of their membership interest in the Company, whether voluntarily or involuntarily, without the prior written consent of the Manager. Any attempted transfer, assignment, or disposition in violation of this provision shall be void and of no effect.”
Outline the rights and responsibilities of the member(s) with respect to the management, operations, and decision-making processes of the LLC.
Sample verbiage: “The Member shall have the right to participate in the high-level decision-making processes of the Company, including the appointment or removal of the Manager. The Member shall not be responsible for the day-to-day operations of the Company and shall have no authority to bind the Company in any manner, except as expressly provided in this Agreement.”
Include indemnification provisions to protect the member(s) and manager(s) from personal liability for actions taken on behalf of the company.
Sample verbiage: “The Company shall indemnify, defend, and hold harmless the Member and the Manager from and against any and all claims, liabilities, damages, or expenses (including reasonable attorney’s fees) arising from actions taken by them in good faith and within the scope of their authority as set forth in this Agreement.”
Specify the events that may trigger the dissolution of the LLC and the procedures for winding up its affairs and distributing its assets.
Sample verbiage: “The Company may be dissolved upon the occurrence of any of the following events: (a) the written consent of the Member; (b) the death, incapacity, or bankruptcy of the Member; or (c) any other event that results in the termination of the Member’s interest in the Company, as provided by law. Upon dissolution, the Company’s assets shall be liquidated, and its debts and liabilities shall be paid or provided for in accordance with applicable law. Any remaining assets shall be distributed to the Member in accordance with their capital account balance.”
Establish the process for amending the Operating Agreement, including any required approvals and notice provisions.
Sample verbiage: “This Agreement may be amended, modified, or restated only by a written instrument executed by the Member and the Manager. Any amendment, modification, or restatement of this Agreement shall be effective upon its execution and delivery to the Member and the Manager.”
Specify the governing law and jurisdiction for interpreting and enforcing the Operating Agreement.
Sample verbiage: “This Agreement shall be governed by and construed in accordance with the laws of the State of [State], without regard to its conflicts of law principles. Any legal action or proceeding arising out of or relating to this Agreement shall be brought exclusively in the state or federal courts located in [County], [State], and the parties hereby consent to the personal jurisdiction and venue of such courts.”
Include a severability clause to ensure that the invalidity or unenforceability of any provision of the Operating Agreement does not affect the validity or enforceability of the remaining provisions.
Sample verbiage: “If any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect under any applicable law, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been included.”
State that the Operating Agreement constitutes the entire agreement between the parties and supersedes all prior agreements, understandings, or representations, whether oral or written.
Sample verbiage: “This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, and representations, whether oral or written, relating to such subject matter.”
In conclusion, a well-drafted Operating Agreement is essential for establishing and maintaining asset protection within a single-member LLC. By including these key provisions and tailoring the document to your specific needs and circumstances, you can create a strong foundation for your LLC’s management, operations, and asset protection. Always consult with an attorney to ensure that your Operating Agreement complies with applicable laws and regulations and is customized to your unique business objectives.
Once you have established a solid foundation for your single-member LLC through the Operating Agreement, it is essential to follow best practices to maintain asset protection. These practices will help you to minimize risks, protect your personal assets, and maintain the limited liability protection provided by your LLC structure. Here are some best practices for maintaining asset protection in your single-member LLC:
One of the most crucial aspects of maintaining asset protection is keeping your personal and business finances separate. This includes maintaining separate bank accounts, credit cards, and financial records for the LLC. Mixing personal and business finances can weaken the limited liability protection of your LLC and expose your personal assets to potential claims by creditors.
Maintain accurate and up-to-date records of your LLC’s financial transactions, contracts, and other relevant documents. This includes maintaining minutes of meetings, resolutions, and other decisions made by the manager(s) or member(s) of the LLC. Proper record-keeping is essential for demonstrating the separateness of the LLC as a distinct legal entity, which can help maintain limited liability protection.
Adhere to the terms, conditions, and procedures outlined in your LLC’s Operating Agreement. This includes making distributions according to the agreed-upon terms, adhering to the management structure, and following any other provisions set forth in the agreement. Failing to follow the Operating Agreement can jeopardize your LLC’s asset protection and potentially expose your personal assets to liability.
Ensure that your LLC complies with all applicable federal, state, and local laws and regulations, including tax filings, annual reports, and licensing requirements. Non-compliance can lead to fines, penalties, and even the dissolution of your LLC, which can undermine its asset protection.
Obtain adequate insurance coverage for your LLC, including general liability, professional liability, and property insurance. Insurance can provide an additional layer of protection for your personal assets by covering potential claims against the LLC that may exceed its available assets.
Whenever possible, avoid providing personal guarantees for loans, leases, or other financial obligations on behalf of your LLC. Personal guarantees can expose your personal assets to liability in the event of a default or non-payment by the LLC.
Periodically review and update your LLC’s Operating Agreement to ensure that it remains current and reflects any changes in your business operations or applicable laws and regulations. Regularly updating the Operating Agreement can help maintain the LLC’s asset protection and ensure that it continues to provide the intended benefits.
Consult with legal, tax, and financial professionals to ensure that your LLC is structured and operated in a manner that maximizes asset protection and complies with all applicable laws and regulations. Professionals can provide valuable advice and guidance on best practices, potential risks, and strategies for maintaining your LLC’s asset protection.
By following these best practices, you can help maintain the asset protection benefits provided by your single-member LLC and protect your personal assets from potential liabilities associated with your business operations. Regularly reviewing and updating your Operating Agreement, maintaining proper records, and consulting with professionals can all contribute to the ongoing success and stability of your LLC.
As your single-member LLC grows and evolves, it’s essential to continuously monitor and adapt your asset protection strategy. Changes in your business operations, industry, or the legal landscape can impact the effectiveness of your asset protection measures. Here are some steps to consider when monitoring and adapting your asset protection strategy:
Regularly review industry news, legal updates, and other relevant sources to stay informed about changes that may impact your business and asset protection strategy. This can include new regulations, court decisions, or industry trends that may require adjustments to your LLC’s Operating Agreement or other practices.
Periodically assess the risks associated with your business operations and determine whether your current asset protection measures are adequate to address those risks. This may involve conducting a risk assessment, reviewing your insurance coverage, or consulting with professionals to identify potential vulnerabilities and develop strategies for mitigating them.
As your business grows or evolves, it’s essential to adapt your asset protection measures accordingly. This can include updating your Operating Agreement to reflect changes in management structure, business activities, or other aspects of your LLC’s operations. It may also involve implementing new policies, procedures, or controls to address new risks or liabilities.
Implement and maintain strong corporate governance practices to help preserve your LLC’s limited liability protection. This includes holding regular meetings, maintaining accurate records, and ensuring that all decisions are made in accordance with the Operating Agreement and applicable laws and regulations.
Regularly monitor your LLC’s compliance with federal, state, and local laws and regulations, and address any issues that arise. This can involve reviewing tax filings, annual reports, licensing requirements, and other compliance obligations to ensure that your LLC remains in good standing and its asset protection measures remain effective.
Maintain an ongoing relationship with legal, tax, and financial professionals to help you monitor and adapt your asset protection strategy. These professionals can provide valuable advice and guidance on best practices, potential risks, and strategies for maintaining and enhancing your LLC’s asset protection.
In conclusion, asset protection is a critical aspect of operating a single-member LLC, as it helps safeguard your personal assets from potential liabilities associated with your business activities. By carefully drafting an Operating Agreement that includes key provisions, following best practices for maintaining asset protection, and continuously monitoring and adapting your asset protection strategy, you can create a solid foundation for your LLC’s success and minimize the risks associated with your business operations.
Remember that establishing and maintaining asset protection is an ongoing process that requires diligence, attention to detail, and the assistance of professional advisors. By staying informed about changes in the legal and industry landscape, periodically reviewing and updating your Operating Agreement, and consulting with legal, tax, and financial professionals, you can help ensure that your single-member LLC continues to provide robust asset protection and support the long-term success of your business.
Q: What is an Operating Agreement, and why is it important for a single-member LLC?
A: An Operating Agreement is a legal document that outlines the terms and conditions governing the operation of a Limited Liability Company (LLC). It is an essential document for any single-member LLC, as it sets forth the company’s management structure, capital contributions, distribution of profits and losses, transfer restrictions, and other critical provisions. An Operating Agreement is crucial for asset protection, separation of personal and business assets, and protection from creditors.
Q: What is the difference between a Member-Managed and a Manager-Managed structure, and which is better for asset protection?
A: In a Member-Managed structure, the member(s) of the LLC are responsible for managing the company’s operations and decision-making processes. In a Manager-Managed structure, separate managers are appointed to handle these responsibilities. A Manager-Managed structure can provide better asset protection since management rights are separated from the member’s distribution rights, making it harder for creditors to gain control of the LLC or its assets. However, the choice between the two structures depends on the unique needs and circumstances of the business.
Q: What provisions should be included in an Operating Agreement for asset protection?
A: Key provisions to include in an Operating Agreement for asset protection include the management structure, capital contributions, distributions, membership transfer restrictions, indemnification, and dissolution and winding-up procedures. These provisions help establish and maintain asset protection by outlining the company’s management, decision-making processes, and procedures for handling potential liabilities.
Q: Is it necessary to hire an attorney to draft an Operating Agreement for a single-member LLC?
A: While it is not legally required to hire an attorney to draft an Operating Agreement for a single-member LLC, it is highly recommended. An experienced attorney can help ensure that the Operating Agreement is tailored to the specific needs of the business, complies with applicable laws and regulations, and provides maximum asset protection. An attorney can also help identify potential legal issues and risks that the business owner may not be aware of.
Q: Can an Operating Agreement be amended or modified after it is executed?
A: Yes, an Operating Agreement can be amended or modified after it is executed, provided that the amendment is made in writing and executed by all parties to the agreement. It is important to keep the Operating Agreement up-to-date and reflective of any changes in the business’s needs or circumstances.
Q: How does an Operating Agreement help protect an LLC from personal liability?
A: An Operating Agreement helps protect an LLC from personal liability by establishing the company as a separate legal entity from its member(s). This separation creates a “veil” between the company’s assets and the personal assets of its member(s), protecting the member(s) from personal liability in the event that the company is sued or incurs debt. Additionally, an Operating Agreement can include indemnification provisions that further protect the member(s) from personal liability for actions taken on behalf of the company.
Q: Can an Operating Agreement be used to protect the LLC from creditors?
A: Yes, an Operating Agreement can be used to protect the LLC from creditors by including provisions that limit or restrict the transfer of membership interests or establishing a Manager-Managed structure that separates management from distribution rights. These provisions can make it more difficult for creditors to gain control of the LLC or its assets in the event of a lawsuit or bankruptcy.
Q: What happens if an Operating Agreement is not in place for a single-member LLC?
A: If an Operating Agreement is not in place for a single-member LLC, the LLC will be governed by the default laws of the state in which it is organized. These default laws may not reflect the specific needs or circumstances of the business and may not provide adequate asset protection. Additionally, without an Operating Agreement, the LLC may be subject to personal liability and may not have clear procedures for handling potential legal issues or disputes.
Q: Can an Operating Agreement be used to protect the LLC’s intellectual property?
A: Yes, an Operating Agreement can be used to protect the LLC’s intellectual property by establishing ownership rights, licensing agreements, and other provisions related to the company’s intellectual property. Additionally, an Operating Agreement can include non-compete clauses that restrict the member(s) from engaging in competing activities that could damage the company’s intellectual property or other assets.
Q: Can an Operating Agreement be modified to reflect changes in the business’s needs or circumstances?
A: Yes, an Operating Agreement can be modified or amended to reflect changes in the business’s needs or circumstances. It is important to keep the Operating Agreement up-to-date and reflective of any changes in the company’s operations, ownership structure, or other critical aspects. Any modifications or amendments should be made in writing and executed by all parties to the agreement.
Q: Can an Operating Agreement be used to address potential conflicts between the member(s) and the manager?
A: Yes, an Operating Agreement can be used to address potential conflicts between the member(s) and the manager by establishing clear procedures for decision-making and dispute resolution. The Operating Agreement can outline the roles and responsibilities of the manager and the member(s) and provide procedures for removing or replacing the manager in the event of a dispute or breach of duty.
Q: What is the process for creating an Operating Agreement for a single-member LLC?
A: The process for creating an Operating Agreement for a single-member LLC typically involves the following steps:
Q: How often should an Operating Agreement be reviewed or updated?
A: An Operating Agreement should be reviewed and updated whenever there are changes in the business’s needs or circumstances, such as changes in ownership structure, management, capital contributions, or business activities. It is also a good practice to review the Operating Agreement annually to ensure that it remains up-to-date and reflects any changes in applicable laws or regulations.
Q: Can an Operating Agreement be used to protect the member(s) in the event of bankruptcy?
A: Yes, an Operating Agreement can be used to protect the member(s) in the event of bankruptcy by including provisions that limit or restrict the transfer of membership interests or provide for the orderly dissolution and distribution of the company’s assets. These provisions can help ensure that the member(s) are protected in the event of a bankruptcy or other financial difficulties.
Q: How does an Operating Agreement affect tax liability for a single-member LLC?
A: An Operating Agreement does not directly affect tax liability for a single-member LLC, as the company’s income is generally reported on the member’s personal tax return. However, an Operating Agreement can help establish the company’s management structure and procedures for handling profits and losses, which may affect the company’s tax liability. Additionally, an Operating Agreement can include provisions related to tax allocation, such as allocating losses to the member(s) or establishing procedures for distributing profits to minimize tax liability.
Q: Can an Operating Agreement be used to protect the member(s) from personal liability in the event of an accident or injury?
A: An Operating Agreement alone may not be sufficient to protect the member(s) from personal liability in the event of an accident or injury. However, an Operating Agreement can be used in conjunction with other asset protection strategies, such as obtaining adequate insurance coverage or establishing a separate legal entity for the company’s riskier activities. Additionally, an Operating Agreement can include indemnification provisions that may provide some protection from personal liability for actions taken on behalf of the company.
Q: Can an Operating Agreement be used to establish procedures for handling potential legal disputes or claims?
A: Yes, an Operating Agreement can be used to establish procedures for handling potential legal disputes or claims, such as arbitration or mediation procedures. By establishing clear procedures for dispute resolution, an Operating Agreement can help prevent legal disputes from escalating and potentially harming the company’s assets or reputation.
Q: Is an Operating Agreement required by law for a single-member LLC?
A: While an Operating Agreement is not required by law for a single-member LLC in most states, it is highly recommended. An Operating Agreement helps establish and maintain the company’s legal and financial structure, which can provide valuable asset protection and help prevent potential legal disputes or issues. Additionally, some states may require an Operating Agreement as part of the LLC formation process or for specific types of businesses or industries.
[Your Company Name], LLC
Operating Agreement
This Operating Agreement (the “Agreement”) is entered into and effective as of [Date], by [Your Name] (the “Member”), who is the sole member of [Your Company Name], LLC (the “Company”), a limited liability company organized under the laws of the State of [Your State].
Article 1: Formation
1.1 Formation. The Member hereby forms the Company as a single-member limited liability company pursuant to the applicable laws of the State of [Your State] and agrees to the terms and conditions set forth in this Agreement.
1.2 Name. The name of the Company shall be [Your Company Name], LLC.
1.3 Purpose. The purpose of the Company is to engage in any lawful activity for which limited liability companies may be organized under the laws of the State of [Your State]. The Company’s primary business activities shall include, but are not limited to, [Your Business Activities].
1.4 Principal Office. The principal office of the Company shall be located at [Your Company Address], or at such other location as may be determined by the Member.
1.5 Registered Agent. The registered agent of the Company shall be [Registered Agent’s Name and Address], or as otherwise designated by the Member.
Article 2: Management
2.1 Manager-Managed Structure. The management of the Company shall be vested in a single manager (“Manager”) who shall be appointed by the Member. The Manager shall have the authority to make decisions on behalf of the Company and manage its day-to-day operations, subject to the limitations set forth in this Agreement.
2.2 Manager’s Authority. The Manager shall have the authority to enter into contracts, agreements, and transactions on behalf of the Company, and to bind the Company in all matters related to the conduct of its business. The Manager shall act in the best interests of the Company and in accordance with the terms and conditions of this Agreement.
2.3 Member’s Rights and Responsibilities. The Member shall have the right to participate in the high-level decision-making processes of the Company, including the appointment or removal of the Manager. The Member shall not be responsible for the day-to-day operations of the Company and shall have no authority to bind the Company in any manner, except as expressly provided in this Agreement.
Article 3: Capital Contributions and Distributions
3.1 Capital Contributions. The initial capital contribution of the Member shall be $[Amount], which shall be used for the establishment and operation of the Company. Additional capital contributions may be made by the Member at their discretion, subject to the terms and conditions set forth in this Agreement.
3.2 Distributions. Profits and losses of the Company shall be allocated to the Member in proportion to their capital account. Distributions to the Member may be made at the discretion of the Manager and shall not be subject to any mandatory or fixed schedule. The Manager may make non-pro rata distributions, as they deem appropriate and in the best interest of the Company.
Article 4: Transfer of Membership Interest
4.1 Transfer Restrictions. The Member shall not transfer, assign, or otherwise dispose of their membership interest in the Company, whether voluntarily or involuntarily, without the prior written consent of the Manager. Any attempted transfer, assignment, or disposition in violation of this provision shall be void and of no effect.
Article 5: Indemnification
5.1 Indemnification. The Company shall indemnify, defend, and hold harmless the Member and the Manager from and against any and all claims, liabilities, damages, or expenses (including reasonable attorney’s fees) arising from actions taken by them in good faith and within the scope of their authority as set forth in this Agreement.
Article 6: Dissolution and Winding Up
6.1 Dissolution. The Company may be dissolved upon the occurrence of any of the following events: (a) the written consent of the Member; (b) the death, incapacity, or bankruptcy of the Member; or (c) any other event that results in the dissolution of the Company under the laws of the State of [Your State].
6.2 Winding Up. Upon the dissolution of the Company, the Manager shall wind up the Company’s affairs and distribute the Company’s assets in accordance with the terms of this Agreement and applicable law. Any remaining assets shall be distributed to the Member in proportion to their capital account.
Article 7: Miscellaneous Provisions
7.1 Notices. Any notice required or permitted under this Agreement shall be given in writing and delivered personally or sent by certified mail, return receipt requested, to the addresses of the parties set forth in this Agreement or to such other addresses as may be designated in writing by the parties.
7.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of [Your State] without regard to its conflict of law provisions.
7.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations, understandings, and agreements between the parties, whether written or oral.
7.4 Amendments. This Agreement may be amended, modified, or supplemented only by a written instrument executed by the parties.
7.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
7.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
In Witness Whereof, the undersigned has executed this Operating Agreement as of the date first above written.
[Your Name] Member
[Your Company Name], LLC
By: [Manager’s Name] Manager
