Operating Agreement for Single
Member LLC
An operating agreement is an agreement between
limited liability company ("LLC") and the Member
governing the LLC's business, and Member's
financial and managerial rights and duties.
ALL INFORMATION AND FORMS ARE PROVIDED “AS IS” WITHOUT ANY WARRANTY,
EXPRESS, IMPLIED, OR OTHERWISE, INCLUDING AS TO THEIR LEGAL EFFECT AND
COMPLETENESS. They are for guidance and should be modified to meet your needs and the
laws of your state. Use at your own risk. Docstoc and anyone who participated in providing or
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modifying registered document creating or entering into an Attorney-Client relationship. Docstoc
does not provide legal advice. The information and forms are not a substitute for the advice of
your own attorney.
Operating Agreement for Single-Member LLC
This operating agreement (the “Agreement”) is made effective as of the ______________ day of
________________, 20________ by and between _____________________, a
___________________ limited liability company having its registered offices at
___________________________________ (the “Company”), and _____________________
having an address at _______________________________, the Member.
RECITALS
The Member is entering into this Agreement for the purpose of forming a limited liability
company under the _________________________ Act of the state of _________________ (the
“Act”).
For and in consideration of the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Member and the Company hereby agree to the following terms and conditions:
1. Formation
1.1 Name
The name of the Company is ______________Name of New LLC____________. All business of
the Company shall be conducted only under this name.
1.2 Articles of Organization
The Articles of organization for the Company were filed on________________with the
Secretary of State for the state of ______________________.
1.3 Purpose
The purpose of the Company is as stated in the Articles of Organization.
1.4 Principal Place of Business
The principal place of business of the Company will initially be located at
____________________address______________________. The Company may relocate the
registered office to such other places as designated by Member.
1.5 Permitted Business
The business of the Company shall be:
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(a) to accomplish any lawful Purpose which shall at any time appear necessary for the
benefit of the Company;
(b) to exercise all other powers necessary for running the business of the Company which
may be legally exercised by any limited liability companies under the Act; and
1.6 Term
The Company will continue to exist unless dissolved as provided in this Agreement.
1.7 Registered Agent
The registered agent for the Company is: ______________________________ having an
address at ______________________________ The Member may, at any time, change the
registered agent by filing appropriate filings with the Secretary of State. In the event the
registered agent ceases to act in its capacity for any reason the Member shall immediately
designate a replacement for the registered agent.
2. MEMBER
2.1 Termination of Member's Interest
(a) Individual – In the event if the Member is an individual and dies or if a court of
competent jurisdiction adjudges the Member to be incompetent to manage his person or property,
such a Member will cease to be a member of the Company. Under such circumstances the
Member's executor, administrator, guardian, conservator, or other legal representative may
exercise all the Member's rights for the purpose of settling the Member's estate or the assets.
(b) Entity - If a member is a corporation, limited liability company, trust, or other entity and
is dissolved or terminated, the powers of that Member may be exercised by its legal
representatives, executors or successors.
2.2 Additional Members
Except for the holders who subsequently become a member upon termination of Member’s
interest, any additional members may not be admitted. The Company may admit one or more
additional members only upon written consent of the Member. If new members are admitted, the
Articles of Organization and the Operating Agreement will be appropriately amended.
2.3 Management of Business
The business and all affairs of the Company shall be managed by the Member. The Member
shall act as the agent of the Company and will have authority to bind the Company on all
matters. The authority of the Member includes, without limitation, the authority to:
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(a) sell, lease, exchange, mortgage, pledge, or otherwise transfer or dispose of all or substantially
all of the property or assets of the Company;
(b) merge the Company with any other entity;
(c) amend the articles of organization of the Company or this Agreement;
(d) change the nature of the business of the Company;
(e) commence a voluntary bankruptcy case for the Company; and
(f) execute and deliver:
(i) all contracts, conveyances, assignments leases, sub-leases, agreements, management contracts
and maintenance contracts covering or affecting the Company's assets;
(ii) all checks, drafts and other orders for the payment of the Company's funds;
(iii) all promissory notes, loans, security agreements and other similar documents; and,
(iv) all other instruments of any other kind relating to the Company's affairs.
2.4 Compensation and Reimbursement
The Member will not be entitled to payment of any salary or other compensation for services
provided to the Company. The Member is, however, entitled to reimbursement from the
Company for reasonable expenses incurred on behalf of the Company.
2.5 Liability
The Member, or any manager, officers and agents of the Company shall not be personally liable
or responsible for any liabilities, debts or obligations incurred while acting for or on behalf of the
Company in any official or authorized capacity. Any failure on part of the Company to observe
any formalities or requirements relating to the exercise of its powers or the management of its
business under this Agreement or the Act shall not be grounds for imposing any personal liability
on the Member or any manager, officers or agents of the Company. The Company shall
indemnify the Member, managers, officers, and agents and all of its former mangers, officers,
and agents from such liability to the fullest extent permitted by law
2.6 Title to Assets
All title to the assets of the Company will be held in the name of the Company. The Member
does not have any right over the assets of the Company or any ownership interest in those assets
except indirectly as a result of the Member’s ownership of an interest in the Company.
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3. CAPITAL CONTRIBUTIONS
3.1 Initial Contribution
The initial capital contribution contributed by Member to the Company in exchange for the
Member's interest in the Company is _____________________________. The Member will not
receive any interest on this capital contribution. This initial capital contribution shall be made
concurrently with the Member's execution and delivery of this Agreement.
3.2 Loans
In the event the capital needs of the Company exceed the capital contributions, the Member may,
take on loan from the financial institutions such additional monies necessary for the Company in
such amounts and on terms and conditions to be agreed upon by the Company and the Member.
4. PROFIT AND LOSS
The net profit or net loss of the Company for each financial year will be fully allocated to the
Member. The Member must report this on all federal, state, and local income and other tax
returns required to be filed by the Member
5. DISTRIBUTIONS
Cash distributions shall be made in such amounts and at such times as may be determined by the
Member in its sole discretion. No distribution shall be declared or paid unless, after the
distribution is made, the Company's assets exceed the Company's liabilities.
6. ACCOUNTING AND RECORDS
The Company may maintain such books and records relating to the operation of the Company as
are appropriate and adequate for the Company's business. The books and records are to be
available for inspection by the Member at the principal office. The funds, assets, properties, and
accounts of the Company must be maintained separately, and may not be mingled with those of
the Member or any other person.
7. DISSOLUTION AND TERMINATION
(a) The Company will dissolve upon the earlier of
(i) approval of dissolution by the Member; or
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(ii) upon such time as the Company has no members.
(b) Neither the death, incompetency, or bankruptcy of the Member nor the assignment of the
Member's entire membership interest will dissolve the Company.
(c) Upon the dissolution of the Company, the affairs of the Company must be wound up by
the Member. Before winding up the affairs of the Company, a full account of the assets and
liabilities of the Company must be taken by the Member, and the assets of the Company must
then be promptly liquidated. The proceeds must first be applied to creditors of the Company in
satisfaction of all liabilities and obligations of the Company. Any remaining proceeds may then
be allocated to the Member.
8. GOVERNING LAW
It is the intent of the parties hereto that all questions with respect to the construction of this
Agreement and the rights, duties, obligations and liabilities of the parties shall be determined in
accordance with the applicable provisions of the laws of the State of ________________.
9. MISCELLANEOUS PROVISIONS
9.1 This Agreement shall be binding upon, and inure to the benefit of, all parties hereto, their
personal and legal representatives, guardians, successors, and assigns to the extent, but only to
the extent, that assignment is provided for in accordance with, and permitted by, the provisions
of this Agreement.
9.2 Nothing herein contained shall be construed to limit in any manner the Member or his
respective agents, servants, and employees, in carrying out his separate businesses or activities.
9.3 Throughout this Agreement, where such meanings would be appropriate: (a) the
masculine gender shall be deemed to include the feminine and the neuter and vice versa, and (b)
the singular shall be deemed to include the plural and vice versa. The headings herein are
inserted only as a matter of convenience and reference, and in no way define or describe the
scope of the Agreement or the intent of any provisions thereof.
9.4 Nothing contained in this Agreement shall be construed as requiring the commission of
any act contrary to law. In the event there is any conflict between any provision of this
Agreement and any statute, law, ordinance or regulation contrary to which the Member or the
Company have no legal right to contract, the latter shall prevail, but in such event the provisions
of this Agreement thus affected shall be curtailed and limited only to the extent necessary to
conform with said requirement of law. In the event that any part, article, section, paragraph or
clause of this Agreement shall be held to be indefinite, invalid, or otherwise unenforceable, the
entire Agreement shall not fail on account thereof, and the balance of the Agreement shall
continue in full force and effect.
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9.5 The provisions of this Agreement are intended only for the regulation of relations
between the Member and the Company. This Agreement is not intended for the benefit of
creditors and does not grant any rights to or confer any benefits on creditors or any other person
who is not a Member of the Company.
IN WITNESS WHEREOF, the parties have hereunto set their hands and acknowledged this
Agreement effective as of ________, 20______.
MEMBER:
By: _______________________________ Date: _____________
COMPANY:
By: _______________________________ Date: _____________
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E IV
DURATION OF THE COMPANY
The company shall commence immediately, upon the filing of the articles of organization with the
Office of the ____ Secretary of State and shall terminate on _________ .
ARTICLE V
ALLOCATION OF PROFITS AND LOSSES
Each year when there is more than one member and prior to thirty [30] days of filing the K-1 return,
the members, by majority of capital and profits interest vote shall determine who is to receive, and in what
ratio, the income tax special allocations of profits and losses. When there is only one member the entity does
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not have standing for federal partnership tax treatment but rather, is treated as a disregarded entity. Therefore,
the sole member treats the profits and losses for federal income tax purposes on the member's personal IRS
Form 1040, Schedule C.
ARTICLE VI.
CAPITAL CONTRIBUTIONS
When, if ever, there is more than one member, then the undersigned members agree that
________________capital contribution is required to become a member. However, as the needs of the
company require, the member[s] agree to share in all post formation capital contributions, profits, and surplus
of the company according to the percentage of their beneficial interest. New members may be required to
make a capital contribution as a condition of becoming a member. Conditions of membership are to be
determined on a case by case basis by the existing members. Each member owns an undivided beneficial
interest in the business and company based on their capital accounts which are to be maintained in the
following relationship:
___________100%
ARTICLE VII
ADDITIONAL CAPITAL CONTRIBUTIONS
When, if ever, there is more than one member then the members may contribute in proportionate
amounts, any additional capital deemed necessary for the operation of the company, provided, however, that in
the event any member deems it advisable to refuse or fails to contribute his share of any or all of the additional
capital, then the other members or any one of them may contribute the additional capital not paid in by such
refusing member and shall receive therefore an increase in the proportionate share of the member's interest or
interest in the entire company in direct proportion to the said additional capital contributed. Unless otherwise
agreed, the right to make up additional capital contributions of a refusing member shall be available in the
same order as the right to purchase in the case of withdrawal or death of a member, as set forth in Articles
XVII and XVIII.
ARTICLE VIII
DIVISION OF PROFITS AND LOSSES
When, if ever, there is more than one member then each of the members shall own a profit interest in
the company as set forth in Article VI, entitled "Capital Contributions", except as the same may hereafter vary
or change as provided in Article VII, entitled "Additional Capital Contributions". When there is more than
one than one member all profits of the company enterprise shall be shared by each of said members according
to their respective percentage of capital interest. A separate capital account shall be maintained for each
member. No member shall make any withdrawals from capital without prior approval of the company. If the
capital account of the member becomes impaired, his share of subsequent company profits shall be first
credited to his capital account until that account has been restored.
ARTICLE IX
RIGHTS AND DUTIES OF THE PARTIES
This entity is to be member managed. When there is more than one member company decisions and
actions shall be decided by a vote of majority-in-capital interest of the membership, at meetings regularly
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called with notice to all members. For purposes of determining a "majority-in-capital interest", a member's
interest will be his capital interest in as set forth in Article VI, and a majority will mean more than fifty
percent (50%).
ARTICLE X
COSTS AND EXPENSES
Except herein provided no member owner shall be separately compensated on a salaried basis for
service performed in carrying out the operation of the company. No salaries or individual compensation shall
be otherwise payable, without consent of the company, for the normal management. Although the company
shall, at all times, employ non-members at a designated salary, members may act in any capacity and serve
with or without compensation.
ARTICLE XI
MEMBER DUTIES AND RESTRICTIONS
11.1 When, if ever, there is more than one member then no member, without the consent of the members or
pursuant to this agreement may endorse any note or act as an accommodation party, or otherwise become
surety for any person in any transaction involving this company. Without the consent of the company or
pursuant to this agreement no member, when there is more than one member, shall on behalf of the company
borrow or lend money, or make, deliver or accept any commercial paper, or execute any mortgage, security
agreement, bond, or lease, or purchase or contract to purchase, or sell or contract to sell any property for or of
the company. If there is more than one member no member owner shall, except with the consent of the other
members or pursuant to this agreement, mortgage, grant a security interest in its share in the member's interest
or in the company, its capital assets or property, or do any act detrimental to the best interest of the company
or which would make it impossible to carry on the ordinary purpose of the company. When there is more than
one member the members have no authority to act for the company absent clear written authority.
11.2 When, if ever, there is more than one member the company will be managed by _______ who is
governed by the directives of the members. From time to time the manager pursuant to the directives of the
members may allocate specific managerial activities among the various employed staff. The members will
appoint at least one trustee, who will serve until replaced. When a manager is appointed, then he shall be
elected annually by the members in the manner prescribed for voting in this agreement.
11.3 Managers, when used, are the chief executive officers of the company and responsible for the general
overall supervision of the business and affairs of the company. They will preside at all meetings of the
members. The managers may sign, on behalf of the company, deeds, mortgages, bonds, contracts or other
instruments which have been appropriately authorized to be executed by the members, except in cases where
the signing or execution is expressly delegated by the members or by this agreement or by statute to some
other officer or agent of the company. In general, the manager will perform all duties as may be prescribed by
the members from time to time.
11.4 The specific authority and responsibility of the manager includes:
1. To undertake activities to effectuate this agreement and decisions of the members.
2. To direct and supervise the operation of the company.
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3. Within parameters as may be set by the members, to establish charges for services and products of the
company as may be necessary to provide adequate income for the efficient operation of the company.
4. Within the budget established by the members, to set and adjust wages and rates of pay for all
personnel of the company and to appoint, hire and dismiss all personnel and regulate their hours of
work.
5. To keep the members advised in all matters pertaining to the operation of the company, including
services rendered, operating income and expense, financial position, and to this end, shall prepare and
submit a report to the members at each regular meeting and at other times as may be directed by the
members.
ARTICLE XII
INDEMNIFICATION
The member may indemnify any member, manager, employee or agent against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in
connection with action, suit or proceeding, if the members determine that he acted in good faith in a manner he
reasonably believed to be in the best interest of the company. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or on a plea of nolo contendere or its equivalent, will
not in itself create a presumption that the person did or did not act in good faith and in a manner which he
reasonably believed to be in the best interest of the company and, with respect to any criminal action or
proceeding, has reasonable cause to believe that his conduct was unlawful.
ARTICLE XIII
BANKING
All funds of the company shall be deposited in its name in such checking account or accounts as shall
be designated by the manager or the members. All withdrawals there from are to be made upon written bank
instruments which must be signed by the manager or an authorized member.
ARTICLE XIV
BOOKS
The company books shall be maintained at the company offices, to be retained by the entity, and each
member shall have access thereto. The books shall be kept on a calendar year basis, and shall be closed and
balanced at the end of each tax year. Each party to this operating agreement hereby covenants and agrees to
cause all known business transactions pertaining to the purpose of the company, to be entered properly and
completely into said books. The company is to furnish copies of annual financial statements to the members
and prepare annual tax returns in a timely manner.
ARTICLE XV
INSURANCE
During the course of the term for which this company is formed, the company shall carry liability
insurance in such amounts as are deemed appropriate by the trustee as directed by the company.
ARTICLE XVI
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VOLUNTARY TERMINATION
If the company is dissolved the members shall proceed with reasonable promptness to liquidate the
company. The assets of the company shall be distributed in the following order:
1. To pay or provide for the payment of all company liabilities to creditors other than members, and
liquidating expenses and obligations;
2. To pay debts owing to members other than for capital and profits;
3. To pay debts owing to members in respect to capital; and
4. To pay debts owing to members in respect to profits.
ARTICLE XVII
WITHDRAWAL OF MEMBER BY SALE
When there is more than one member any member desirous of selling his share and interest in the
company shall give the right of first refusal to purchase said share and interest to the remaining members at the
same price as being offered by a bona fide buyer. Each member electing to purchase has the right to purchase
that percentage of the share being sold obtained by dividing his respective percentage of the company by the
total percentage of all members electing to purchase.
When there is more than one member the unanimous consent of all members is required for a member
to sell his share to a non-member or for an assignee of a member to become a member.
ARTICLE XVIII
DEATH OF A MEMBER
If there is only one member and that member dies the member's heirs shall petition a court of
competent jurisdiction to appoint a conservator to wind up the entity. In the event of the death of a member
when there is more than one member, then the deceased's heir or heirs shall be entitled to only succeed to the
economic share and interest of the deceased member. The company may, upon unanimous consent of the
remaining members, as soon as practicable, provide a document by which the remaining members personally
affirm and accept all the terms, conditions and provisions of this operating agreement binding themselves to
continue the same business in writing.
ARTICLE XIX
DISTRIBUTIONS
Prior to dissolution and at least annually as income is received by the company, its accounts
determined and tax returns filed, the members shall determine funds available for distribution. Upon
liquidation, a reasonable reserve as mutually determined in amount shall be established to cover follow-on or
subsequent complaint and warranty construction requirements, if any. Liquidation of the company need not be
delayed provided that such amounts are properly escrowed and arrangement made for performance of such
services as may be required in the interest of the company. Escrows, reserves or liquidating accounts may be
established as escrows or otherwise, which activity need not unduly delay the termination of the company for
all other purposes.
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ARTICLE XX
AMENDMENT OF OPERATING AGREEMENT
When there is more than one member this operating agreement may be altered, amended or repealed
and a new operating agreement may be adopted only by a majority vote of the membership at any annual,
regular or special meeting of the members.
ARTICLE XXI
VIOLATION OF THIS OPERATING AGREEMENT
When there is more than one member any member who violates any term, condition, or provision of
this operating agreement shall keep and save harmless the company's property and shall also indemnify the
other members from any and all claims, demands and actions of every kind and nature whatsoever which may
arise out of or by reason of such violation of any terms and conditions of this operating agreement.
ARTICLE XXII
CAPITAL ACCOUNTS-INCOME AND CREDITS OF MEMBERS
When there is more than one member the company shall maintain for each member a capital account
which reflects that member's separate distributive share, whether or not distributed, of each class or item of the
company income, gain, loss, deduction, or credit described in the IRS sections 702 and 704. If it is determined
that a member's allocation of income, gain, loss, deduction, or credit does not have substantial economic effect
then his distributive share of such income, gain, loss, deduction, or credit shall be determined in accordance
with his interest in the entity. Any special allocations of income, gain, loss or deduction for each member are
to be specified in an exhibit to this agreement. Upon liquidation, members must restore any deficits in offset
provisions of the IRS Code that specifically allocated later income to members with negative capital accounts.
ARTICLE XXIV
FOREIGN QUALIFICATION
Management shall not permit the company to engage in any business outside the state of
__________________ unless and until the company has complied with the requirements necessary to qualify
the company as a foreign limited liability company in the jurisdiction in which the company shall conduct
business.
ARTICLE XXV
LACK OF AUTHORITY
When there is more than one member no member or manager has the authority or power to act for or
on behalf of the company, to do any act that would be binding on the company, or to incur any expenditure
that has not been approved by a majority interest or such greater interest required by the operating agreement,
the articles of organization or applicable law.
ARTICLE XXVI
DISCLOSURE AND WAIVER OF CONFLICTS
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The parties all acknowledge that the company's counsel, [Counsel] , has prepared this operating
agreement on behalf of ____________________ and in the course of his representation of the company, and
that:
The parties have been advised by [Counsel] , that a conflict exists among their individual interests;
and,
The parties have been advised by [Counsel] to seek the advice of independent counsel; and,
The parties have had the opportunity to seek the advice of independent counsel; and,
The parties jointly and severally waive any claim that [Counsel's] representation of the company
constitutes a conflict of interest; and,
The parties have received no representations from [Counsel] about the tax consequences of this
agreement; and,
The parties have been advised by [Counsel] that this agreement may have tax consequences; and,
The parties have been advised by [Counsel] to seek the advice of independent tax counsel; and,
The parties have had the opportunity to seek the advice of independent tax counsel.
ARTICLE XXVII
COUNTERPARTS
This operating agreement may be executed with counterparts, all of which shall be deemed to be one
and the same instrument, and it shall be sufficient each party to have executed at least one, but not necessarily
the same, counterpart.
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IN WITNESS WHEREOF, the parties have hereunto set their hands effective this ____ day
of______________________, 20____.
Signed: _________________
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