Fillable Printable LLC Operationg Agreement
Fillable Printable LLC Operationg Agreement
LLC Operationg Agreement
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This document is the fundamental agreement behind your Limited Liability Corporation. This one is
in plain-English as much as possible – reading it through should be self-explanatory
Many banks require this document when opening a business checking account
NOTICE:
We wish we could provide an agreement that was tailored exactly to your business. While this is not
always possible, we feel that we've come very close and that this document provides you with the head-
start that you need to get your deal moving. Nevertheless, we must make this disclaimer:
• Do Not Use This Agreement 'As-Is.'
• This Agreement Is Not Legal Advice.
• Read it Thoroughly and Make All Appropriate Changes to Fit Your Requirements.
• You Should Have this Agreement Reviewed and Approved by a
Qualified Attorney at Law Before Using It.
• JIAN Accepts No Liability for the Effectiveness of This Document For Your Purposes.
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Agreement compliments of: The Law Firm of Burke & Reedy, www.washingtonpractice.com
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THE MEMBERSHIP INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION AND MAY NOT BE SOLD
OR TRANSFERRED WITHOUT COMPLIANCE WITH ANY APPLICABLE FEDERAL, STATE OR
FOREIGN SECURITIES LAWS.
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[State]
Limited Liability Company
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Section 1: Formation, Name, Purpose, Term And Definitions 5
Section 2: Members, Percentage Interests, Capital Contributions 5
Section 3: Classes And Interests, Extraordinary Actions, Dilution 6
Section 4: Distribution Of Cash & Proceeds; Allocations Of Tax Items 7
Section 5: Management Of The Company 8
Section 6: Rights, Duties And Representations Of Members 13
Section 7: Transfer Of Interests 14
Section 8: Cessation Of Membership 16
Section 9: Dissolution And Winding Up 17
Section 10: Indemnification Of The Managers 18
Section 11: Power Of Attorney For Limited Purposes 18
Section 12: Amendment 19
Section 13: Miscellaneous Provisions 19
Counterpart Signature Page To Operating Agreement 21
Exhibit A: Capital Contribution 22
Exhibit B: Definitions 23
Exhibit C: Tax Allocations 28
Execution Page 32
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Section 1: Formation, Name, Purpose, Term & Definitions
Section 1.1 Formation. The parties to this Agreement hereby enter into a written Operating Agreement
pursuant to the [State] Limited Liability Company Act (the “Act”), to set forth the terms and conditions
of their joint undertaking as Members of the Company, and to carry out the purposes of the Company as
further described herein, in accordance with the provisions of this Agreement and the laws of the State of
[State].
Section 1.2 Name. The name of the Company is [Company], LLC. The Company’s business shall be
conducted under said name, the name “[Company],” and/or such other names as the Manager may from
time to time deem necessary or advisable, provided that necessary filings under applicable assumed or
fictitious name statutes are first obtained.
Section 1.3 Offices & Resident Agent. The name and address of the Resident Agent of the Company in
the State of [State] is:
[Owner/Founder], [Address], [City], [State] [zip code].
The principal office of the Company shall be:
[Address], [City], [State] [zip code],
or such other location as the Manager may, from time to time, designate by notice to the Members.
Section 1.4 Purpose. The purpose and business of the Company shall be to…
[develop and distribute multi-media business productivity tools through software, seminars,
audio/video, and published works.]
Section 1.5 Term. The term of the Company commenced on [Date], upon the acceptance for filing of
the Articles of Organization of the Company by the [State] Corporation Commission, and shall have a
perpetual existence, unless earlier dissolved in accordance with Section 9.1 of this Agreement.
Section 1.6 Defined Terms. The defined terms used in this Agreement, unless the context otherwise
requires, shall have the meanings specified herein or as set forth in Exhibit B, which is attached hereto.
Section 2: Members, Percentage Interests, Capital Contributions
Section 2.1 Members: Exhibit A. The names, addresses, Capital Contributions and Percentage Interests
of all Members shall be designated in Exhibit A, which is attached hereto. The Manager shall cause
Exhibit A to be amended from time to time to reflect the withdrawal of one or more Members or the
admission of one or more additional Members. As of the date of the execution of this Agreement, there
are no Class B or Class C Members. Class A Members shall be admitted in accordance with Section 3.1
hereof. Class B Members shall be admitted in accordance with Section 3.2 hereof. Class C Members
shall be admitted to the Company in accordance with Section 3.3 hereof.
Section 2.2 Capital Contributions. On or prior to the date of this Agreement, each existing Member
shall make a Capital Contribution to the Company in an amount set forth opposite such Member’s name
in Exhibit A.
Section 2.3 Class A Members. [Owner/Founder], and [Founder2] own all of the outstanding Class A
membership Units. See Exhibit A for a list of the Members of the Company.
Section 2.4 Conversion of Class A Interests. Subject to the limitations set forth below in Section 3.6 of
this Operating Agreement, the Manager shall have the right, at any time and from time to time, to admit
one or more additional Class A Members upon such terms and conditions as the Manager shall determine
in their sole discretion, provided that they obtains the prior unanimous written consent of the existing
Class A Members.
Section 2.5 Minimum Interest of the Manager. A Manager shall not be required to own an Interest in
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the Company.
Section 2.6 Additional Capital Liability of Members. No Member shall have any obligation to
contribute capital to the Company except to the extent of the Capital Contribution of such Member
described in this Section 2. No Member of the Company shall have any obligation or duty to advance or
loan funds to the Company for the purpose of satisfying liabilities of the Company or any operating or
carrying costs associated with the Company’s business. No Member shall be personally liable for the
obligations of the Company, whether arising in contract, tort or otherwise, solely by reason of being a
Member of the Company.
Section 2.7 No Interest. No interest shall be paid or due by or from the Company on any contributions
to the capital of the Company, or any advances made by a Member to the Company.
Section 2.8 Indebtedness to Members. Any indebtedness of the Company owed to a Member shall
provide that the payment of principal and interest (if any) shall be made only if, and to the extent that,
payment of a distribution to the Member could then be made under applicable provisions of the Act
without the imposition on the Member of any liability for repayment to the Company.
Section 2.9 Withdrawal of Capital by Interest Holders. Except as otherwise specifically provided in
this Agreement, prior to the liquidation of the Company no Interest Holder shall have the right to require
the return of his/her/its Capital Contribution or the balance of his/her/its Capital Account. There is no
agreed upon time when the Capital Contribution of an Interest Holder is to be returned. No Interest
Holder shall have any right to demand and receive property, in lieu of cash, in return of his/her/its Capital
Account. Provided, however, the Company shall have the option to distribute property in lieu of cash in
the event the Company does not have cash resources available to it for such purpose.
Section 3: Classes & Interests, Extraordinary Actions, Dilution
Section 3.1 Admission of Class A Members. Subject to the limitations set forth in Section 3.6 hereof,
the Manager shall have the right, at any time and from time to time, to admit one or more additional
Class A Members upon such terms and conditions as the Manager shall determine in its sole discretion,
provided that it obtains the prior written consent of a Majority in Interest of all the Class A Members,
and any such Person receiving Class A Interests shall make a Capital Contribution to the Company (in
cash or other property) corresponding to the fair value of such Interest, as determined in the sole
discretion of the Manager.
Section 3.2 Admission of Class B Members. Subject to the limitations set forth in this Section 3.2 and
in Section 3.6 hereof, the Manager shall have the right at any time and from time to time to admit one or
more additional Class B Members and/or to sell or award additional Class B Interests (or rights to
acquire additional Class B Interests) to Persons who are employed by or otherwise have benefited the
Company, upon such terms and conditions as determined in the sole discretion of the Manager.
Section 3.3 Admission of Class C Members. Subject to the limitations set forth in this Section 3.3 and
in Section 3.6 hereof, the Manager shall have the right at any time and from time to time to admit one or
more Class C Members and/or to sell additional Class C Interests (or rights to acquire additional Class C
Interests), provided that any such Person receiving Class C Interests shall make a Capital Contribution to
the Company (in cash or other property) corresponding to the fair value of such Interest, as determined in
the sole discretion of the Manager.
Section 3.4 Conditions for New Members. Notwithstanding anything contained herein to the contrary,
no Person at any time shall be admitted as a Member of the Company unless: The Person delivers to the
Company a written instrument agreeing to be bound by the terms of this Agreement, as it may have been
amended from time to time; and the admission of such Person as a Member will not result in the
termination of the Company.
Section 3.5 Extraordinary Actions. Subject to the limitations set forth in Sections 3.6 and 3.7 hereof,
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the Manager shall have the right at any time, in their sole discretion, and upon such terms and conditions
as they shall determine in their sole discretion, provided they obtain the prior written consent of a
Majority in Interest of the Class A Members, to cause the Company to: (1) Convert from a limited
liability company to a corporation; and (2) Engage in a public offering of its securities; transfer a
substantial portion of its other assets not in the ordinary course of business; or incur any debt in any
single transaction in excess of the greater of (a) One Hundred Thousand U.S. Dollars ($100,000), or (b)
the accumulated capital and reserves of the Company.
In the event of the occurrence of any of the actions described in this Section 3.5, all Members hereby
covenant to cooperate fully and timely with such action and to take any and all actions and execute any
and all documents necessary or appropriate to effectuate such action. In the event the Company converts
to a corporation and the Manager, in their sole discretion, determines that the Company should be taxed
as an S corporation for federal and applicable state income tax purposes, all Members hereby covenant to
cooperate fully and timely with such election and to take any and all actions and execute any and all
documents necessary or appropriate to effectuate such election.
Notwithstanding the above, nothing herein shall be construed to restrict or otherwise limit the exercise by
any Member, upon the occurrence of such a transaction, of such rights as may be provided to Members
under the Act or under other applicable statutes.
Section 3.6 Dilution & Percentage Interest of the Classes. All Interests of all classes shall be diluted
on a Pro Rata Basis to the extent Interests of any and all classes are added or increased in accordance
with this Section 3, including without limitation a dilution resulting from a private or public offering of
securities.
Section 3.7 Merger or Consolidation. A Majority in Interest of the Members shall be required to
approve whether the Company should be acquired by or otherwise enter into a merger or consolidation
transaction with another limited liability company, or with a limited partnership, a corporation, or a
business trust having transferable units of beneficial interest, regardless of whether the Company is the
surviving entity of such transaction.
Section 4: Distribution of Cash & Proceeds; Allocations of Tax Items
Section 4.1 Allocation of Net Available Cash Flow. The Company shall allocate 80% of the Net
Available Cash Flow to Class C Members until such time as the Class C Members’ are allocated an
amount equal to 100% of their investment in the Company plus an annualized rate of 12% per year, and
thereafter, the Members shall be allocated a pro-rata share of the Net Available Cash Flow of the
Company based upon their allocable share of ownership in the Company. Notwithstanding this Section
4.1, the Manager shall have the right to modify the distribution of Net Available Cash Flow with the
prior written consent of a Majority in Interest of all the Members.
Section 4.2 Distribution of Net Available Cash Flow. The Company shall distribute Net Available
Cash Flow to Members at the sole discretion of the Manager. The Company shall be required to make
distributions to Members sufficient to enable each Member to pay taxes on allocations to them of Net
Available Cash Flow of the Company.
Section 4.3 Net Capital Proceeds. Net Capital Proceeds, if any, shall be distributed on a Pro Rata Basis
among all of the Interest Holders. Notwithstanding the foregoing, this Section 4.3 shall not apply to any
distributions made in connection with a termination of the Company, which distributions shall be
governed by Section 9.3 hereof.
Section 4.4 Acknowledgment. All of the Members hereby acknowledge that no distribution of
Available Cash Flow or Net Capital Proceeds pursuant to this Section 4 shall be made to the Members to
the extent that the Manager determine, in their sole discretion, that all or a portion of such funds are
necessary for the payment of or due provision for the (a) liabilities of the Company to all creditors,
including the expenses of a Capital Transaction, and/or (b) additional requirements for funds in
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connection with the Company’s business.
Section 4.5 Capital Accounts & Tax Allocations. A separate Capital Account shall be maintained for
each Interest Holder. Each Capital Account shall be adjusted annually, unless this Agreement, the acts of
the Members in accordance with this Agreement, or the applicable Regulations require a more frequent
adjustment. The maintenance of Capital Accounts and allocation of the Company’s tax items shall
follow the provisions of Exhibit C, attached hereto; provided, however, that the Company at all times
shall conform to the requirements of any Regulations issued with respect to the maintenance of Capital
Accounts and the allocation of tax items. The Company shall exercise its best efforts to take all actions
necessary to cause the allocation of tax items among the Interest Holders to reflect the actual and
anticipated allocation of the Company’s distributions, as set forth in this Section 4 and in Section 9.3
hereof, in conformity with the Capital Account maintenance requirements contained in the Regulations.
Section 5: Management of the Company
Section 5.1 Appointment of Manager: Executive Employment. The Members hereby appoint
[Owner/Founder] as the Manager of the Company. The Managers may enter into employment agreements
with the Company further delineating the duties, rights, compensation and covenants of the Manager.
Any employment agreements shall be read in conjunction with this Agreement.
Section 5.2 Exclusive Authority of Manager. Except as specifically provided in this Agreement and
any Manager’s employment agreement, the exclusive responsibility for managing the business and affairs
of the Company is hereby granted to the Manager pursuant to the Act. Each of the Members appoints and
authorizes the Manager to serve as the sole agent of the Company, (except to the extent that certain
discretionary acts may be delegated by the Manager to certain executive employees of the Company).
The Manager may exercise all powers of the Company and do all such lawful acts necessary to manage
the affairs and operations of the Company as are not by statute, regulations, the Articles of Organization,
or other applicable documentation required to be exercised or done by any of the other Members. Any
Person dealing with the Manager shall be authorized to rely upon the authority of the Manager to bind
the Company in accordance with the rights, powers and duties described in this Agreement. The Manager
shall be an “Authorized Person” of the Company, and shall be authorized to execute or file any document
required or permitted to be executed or filed on behalf of the Company, or to otherwise act as an agent of
the Company, as provided under the Act.
Section 5.3 Binding Authority with Respect to Documents. The Manager shall have the right, power
and authority, acting at all times for and on behalf of the Company, to enter into and execute any
agreement or agreements, promissory note or notes, and any other instruments or documents, and to
undertake and do all acts necessary to carry out the purposes for which the Company was formed. In no
event shall a party dealing with the Company with respect to any document signed or action undertaken
on behalf of the Company have the right to inquire into:
The necessity or expediency of any act or action of the Manager; or
Personal information of a Manager if the Manager is a natural person; or
Any act or failure to act by the Company; or
The identities of Members other than the Manager; or
The existence or non-existence of any fact or facts that constitute conditions precedent to acts by the
Manager (including, without limitation, conditions, provisions and other requirements herein set forth
relating to borrowing and the execution of any encumbrances to secure the borrowing) or that are in any
other manner germane to the affairs of the Company.
Any and every Person relying upon any document signed or action taken by the Manager on behalf of
the Company or claiming thereunder may conclusively presume that (i) at the time or times of the
execution and/or delivery thereof, this Agreement was in full force and effect, (ii) any instrument or
document was duly executed in accordance with the terms and provisions of this Agreement and is
binding upon the Company without requiring the approval or consent of any of the Members thereof, and
(iii) the Manager was duly authorized and empowered to execute and deliver any and every such
instrument or document for and on behalf of the Company.
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Section 5.4 Specific Authority. In furtherance and not in limitation of the provisions of Section 5.2
hereof and of the other provisions of this Agreement, but subject to any limitations contained in this
Agreement (including without limitation Section 3.7 hereof) and a Manager’s employment agreement,
the Manager is specifically authorized and empowered, in Manager’s sole discretion, without regard to
the approval thereof by the Members, to:
a. Direct the employees of the Company to execute, acknowledge and deliver any and all documents,
agreements, notes, contracts, bank resolutions, signature cards, releases, or other instruments on the
Company’s behalf;
b. Make any and all decisions that the Company may be entitled and/or required to make under the
terms of any and all documents, agreements (including employment agreements), or other
instruments relative to the ownership, operation, management and supervision of the Company’s
business;
c. Execute for and on behalf of the Company, and in accordance with the terms of this Agreement,
deeds absolute, mortgages (which term “mortgages” is hereby defined for all purposes of this
Agreement to include Deeds of Trust, financing statements, chattel mortgages, pledges, conditional
sales contracts, and similar security instruments), leases, contracts, promissory notes, or other legal
documents all of which instruments so duly executed as provided herein shall be valid and binding
upon the Company;
d. Cause the Company to incur indebtedness or obtain financing (including without limitation loans
from Members or Affiliates of Members at competitive rates); to issue promissory notes or other
evidences of indebtedness; to prepay in whole or in part, recast, increase, modify, or extend any
liabilities affecting the business of the Company and assumed in connection therewith; to provide
security or collateral in connection with any Company indebtedness or to encumber or pledge any
Company assets; to execute any extensions or renewals of encumbrances with respect to any assets
used in the Company’s business; and to confess judgment on behalf of the Company in connection
with any Company borrowings;
e. Cause the Company to enter into leases of real or personal property in furtherance of any or all of the
purposes of the Company;
f. Cause the Company to purchase real property or personal property and to make reasonable and
necessary capital expenditures and improvements with respect to such property for use in connection
with the operation and management of the Company’s business; to finance such purchases or
expenditures, in whole or in part, by giving the seller or any other Person a security interest in the
property purchased;
g. Cause the Company to sell, exchange or otherwise dispose of any or all of the assets of the Company,
or enter into any Capital Transaction involving the assets or business of the Company, including any
or all of the components of the Company’s business, whether such components are real property,
personal property, or intellectual property, mixed or intangible, such as goodwill, if any;
h. Cause the Company to redeem or acquire the Interest of any Interest Holder pursuant to the terms of
this Agreement or pursuant to the Manager’s authority hereunder, and to exercise any options or
other rights with respect to the Interest of any Interest Holder, on behalf of the Company or for the
Manager’s own account;
i. Open accounts and deposit and maintain funds in the name of the Company in banks, savings and
loan associations, money market funds, or such other financial instruments as the Manager deems
necessary or appropriate;
j. Pay all costs or expenses connected with the operation or management of the Company, including all
debts and other obligations of the Company, from its bank accounts by check or other customary
means (without commingling with the funds of any other Person);
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k. Establish reserves in such amounts as the Manager shall deem appropriate;
l. Enter into, perform and carry out contracts with any Person, including any of the Members or
Affiliates of the Members, at reasonably competitive rates of compensation for the performance of
any and all services that may at any time be necessary, proper, convenient or advisable to carry on
the Company’s business, including entering into exclusive and non-exclusive arrangements;
m. Monitor the quality of services and products provided by vendors to the Company, and add,
discharge, or replace such vendors as needed in accordance with applicable state law;
n. Appoint and discharge executive employees of the Company and delegate specific duties and
authority to Persons who may or may not be employees of the Company;
o. Employ or engage Persons in the operation and management of the Company’s business, on such
terms and for such reasonable compensation as the Manager shall determine (at arm’s length prices
and in keeping with comparable salaries for comparable work), in good faith, to be appropriate and in
the best interests of the Company;
p. Approve the hiring and firing of all employees and agents of the Company, subject to the terms and
conditions of any employment policies and procedures of the Company, and subject to the terms of
this Agreement, any other written agreements and applicable state law;
q. Evaluate the performance of all employees and agents of the Company, including its executive
employees, and monitor the quality of services provided by employees and agents of the Company;
r. Establish and monitor the compensation requirements (reasonable compensation set at arm’s length
prices and in keeping with comparable salaries for comparable work) of all employees and agents of
the Company, including its executive employees;
s. Apply for, make proffers and commitments with regard to and obtain any and all governmental
permits, approvals, licenses necessary and appropriate in connection with or in anyway related to the
Company’s business;
t. Place and carry public liability, workmen’s compensation, fire, extended coverage, business
interruptions, errors and omissions and such other insurance as may be necessary or appropriate for
the protection of the interests and property of the Company;
u. Authorize the lending of money by the Company at prevailing interest rates, including lending to
borrowers who may be Members or Affiliates of Members of the Company;
v. Initiate, settle and defend legal actions on behalf of the Company, including any litigation,
arbitration, mediation, examination, investigation, inquiry, regulatory proceeding, or other similar
matter contemplated by the Company, threatened by any Person or in or with which the Company
may become involved;
w. Submit a claim or liability involving the Company to arbitration;
x. Prepare, maintain, file and disseminate returns, reports, statements, and other information for
distribution to the Internal Revenue Service, the state of [State], Franchise Tax Board or Secretary of
State, the Members and for submission to any governmental or regulatory authority or agency;
y. Deal directly with relevant state and United States regulatory authorities on behalf of the Company
and render decisions with respect to matters involving such authorities;
z. Cause the Company to create one or more wholly or partially owned domestic or foreign subsidiaries,
which may be corporations, limited liability companies or other forms of business entities;
aa. Enter into agreements with Members as appropriate; and
bb. Generally, do all things consistent with any and all of the foregoing on behalf of the Company.
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Section 5.5 Obligations of the Managers. The Manager shall take all actions that may be necessary or
appropriate (i) for the continuation of the Company’s valid existence as a limited liability company under
the applicable state laws; (ii) for the operation, management and supervision of the Company’s business
in accordance with the provisions of this Agreement and applicable laws and regulations.
The Manager shall oversee the preparation, review, and safekeeping of the Company’s records and books
of accounts of all operations, receipts and expenditures of the Company, and shall institute and maintain
such internal controls as may be required to comply with all laws and regulations applicable to the
Company.
The Manager shall deliver to the Members copies of “Information Tax Returns” required under
applicable Federal or state income tax laws, including the Internal Revenue Code of 1986, as amended,
as soon as such return may reasonably be prepared, but not later than the due date of such return as may
be extended pursuant to statutory or administrative provision. Such returns shall reflect the allocation of
the profits or losses of the Company and other tax items as provided in this Agreement to each Member
for the Fiscal Year then ended and shall serve as the annual accounting report to be provided to the
Interest Holders. The cost of all such reports shall be paid by the Company at the Company’s expense.
The Manager shall deliver copies of this Agreement, the Articles of Organization or any amendments
thereto to each Member.
Section 5.6 No Duty to Consult. Except as otherwise specifically provided herein, the Manager shall
have no duty or obligation to consult with or seek the advice of the Members.
Section 5.7 Contracting on Behalf of the Company; Related Persons. The Manager, on behalf of the
Company, may employ a Member, or a Person related to or affiliated with a Member, to render or
perform a service, or may contract to buy property from, or sell property to, any such Member or other
Person; provided, that (i) any such transaction shall be on terms that are fair and equitable to the
Company, comparable to those charged by unrelated parties, and no less favorable to the Company than
the terms, if any, known to be available from unrelated and unaffiliated Persons; and (ii) all parties with
whom the Company contracts will of such qualifications to be consistent with the requirements and
guidelines of applicable [State] law. The Manager may employ, engage, and contract with, on behalf of
the Company, such Persons, firms or corporations as the Manager, in the Manager’s discretion, shall
deem advisable for the operation and management of the business of the Company, including such
managing agents, attorneys, accountants, insurance brokers, appraisers, experts, consultants, and lenders,
on such reasonable terms and for such reasonable compensation, as the Manager, in the Manager’s
discretion, shall determine. Any such Person, firm or corporation may include the Manager, or an
Affiliate of the Manager, or entities otherwise employed or retained by the Manager or in which the
Manager has an interest, provided the compensation paid is in accordance with normal fees charged by
independent parties for similar services.
Section 5.8 Tax Elections. The Manager shall be authorized to take such actions as the Manager, in the
Manager’s discretion, deems necessary or desirable in order to comply with requirements of the Act as
promulgated by the Internal Revenue Code of 1986, as amended, for the purposes of complying with
Federal, local, and state tax requirements. The Manager shall have the power on behalf of the Company,
to make, or to refrain from making, or to revoke, any elections and determinations referred to in the Act
and the Internal Revenue Code of 1986, as amended, including, but not limited to the method(s) of
depreciation, the amortization of organizational expenses, and the method of accounting to be employed
by the Company. All elections shall be made by the Manager with the Internal Revenue Service (“IRS”),
as applicable, in his or her sole discretion, in consideration of the advice of the Company’s accountants
and the underlying interests of the Interest Holders as a whole. In the event that evidence shall be
provided that such election was or shall become disadvantageous to any one or more of the Interest
Holders, such evidence shall not be deemed to be a demonstration of the commission of an act of willful
misconduct or negligence on the part of the Manager. The Manager shall not be responsible to consider
the impact on specific members in making any elections.
