Operating Agreement for Single Member Limited Liability Company (LLC)

Document Sample
Operating Agreement for Single Member Limited Liability Company (LLC) Powered By Docstoc
					This is a sample Single Member Limited Liability Company Operating Agreement that
can be modified to fit any type of business. Limited Liability Companies (“LLC”) are
often the most beneficial classification for business entities because they provide for the
limited liability of corporations while having the benefits of partnership taxation. In order
for the LLC to be valid, it must have an operating agreement and must file the Articles of
Organization with the Secretary of State. This sample operating agreement is ideal for
small businesses that want to operate as an LLC.
      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 ___________________________________ (“Company”), and
_____________________ having an address at _______________________________
(“Member”).
                                    RECITALS

        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, Member
and Company hereby agree to the following terms and conditions:

                                TERMS AND CONDITIONS

1.     Formation

1.1    Name

     The name of Company is ______________ LLC [Name of New LLC]. All business of
Company shall be conducted only under this name.

1.2    Articles of Organization

       The Articles of Organization for Company were filed on ________________with the
Secretary of State for the State of ______________________.

1.3    Purpose

       The purpose of Company is as stated in the Articles of Organization.

1.4    Principal Place of Business

        The principal place of business of Company will initially be located at
____________________ [address]. Company may relocate its registered office to such other
places as designated by Member.

1.5    Permitted Business

       The business of Company shall be:



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        (a)   To accomplish any lawful purpose that shall, at any time, appear necessary for the
benefit of Company; and

      (b)     To exercise all other powers necessary for running the business of Company,
which may be legally exercised by any limited liability company under the Act.

1.6    Term

       Company will continue to exist unless dissolved as provided for in this Agreement.

1.7    Registered Agent

        The registered agent for Company is: ______________________________, having an
address at ______________________________. 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, Member shall immediately designate
a replacement for the registered agent.

2.     MEMBER

2.1    Termination of Member’s Interest

       (a)     Individual—In the event 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 Member will cease to be a member of Company. Under such circumstances, Member’s
executor, administrator, guardian, conservator, or other legal representative may exercise all
Member’s rights for the purpose of settling Member’s estate or the assets.

        (b)    Entity—If 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 members upon termination of
Member’s interest, any additional members may not be admitted. Company may admit one or
more additional members only upon written consent of Member. If new members are admitted,
the Articles of Organization and the Operating Agreement shall be appropriately amended.

2.3    Management of Business

        The business and all affairs of Company shall be managed by Member. Member shall act
as the agent of Company and will have authority to bind Company on all matters. The authority
of 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 Company;

       (b)     Merge Company with any other entity;

       (c)     Amend the Articles of Organization of Company or this Agreement;

       (d)     Change the nature of the business of Company;

       (e)     Commence a voluntary bankruptcy case for Company; and

       (f)     Execute and deliver:

            (i)     All contracts, conveyances, assignments leases, sub-leases, agreements,
management contracts and maintenance contracts covering or affecting Company’s assets;

               (ii)      All checks, drafts, and other orders for the payment of 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 Company’s affairs.

2.4    Compensation and Reimbursement

       Member will not be entitled to payment of any salary or other compensation for services
provided to Company. Member is, however, entitled to reimbursement from Company for
reasonable expenses incurred on behalf of Company.

2.5    Liability

         Member, or any manager, officer, or agent of Company shall not be personally liable or
responsible for any liabilities, debts, or obligations incurred while acting for or on behalf of
Company in any official or authorized capacity. Any failure on part of 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 Member or any manager, officer, or agent of Company. Company shall indemnify 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 Company will be held in the name of Company. Member does
not have any right over the assets of Company or any ownership interest in those assets except
indirectly as a result of Member’s ownership of an interest in Company.




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3.     CAPITAL CONTRIBUTIONS

3.1    Initial Contribution

        The initial capital contribution made by Member to Company in exchange for Member’s
interest in Company is __________________ dollars ($__). Member will not receive any
interest on this capital contribution. This initial capital contribution shall be made concurrently
with Member’s execution and delivery of this Agreement.

3.2    Loans

       In the event the capital needs of Company exceed the capital contributions, Member may
take on loan from financial institutions such additional monies necessary for Company in such
amounts and on terms and conditions to be agreed upon by Company and Member.

4.     PROFIT AND LOSS

       The net profit or net loss of Company for each financial year will be fully allocated to
Member. Member must report this on all federal, state, and local income and other tax returns
required to be filed by Member.

5.     DISTRIBUTIONS

        Cash distributions shall be made in such amounts and at such times as may be determined
by Member in its sole discretion. No distribution shall be declared or paid unless, after the
distribution is made, Company’s assets exceed its liabilities.

6.     ACCOUNTING AND RECORDS

       Company may maintain such books and records relating to the operation of Company as
are appropriate and adequate for the Company's business. The books and records are to be
available for inspection by Member at Company’s principal office. The funds, assets, properties,
and accounts of Company must be maintained separately, and may not be mingled with those of
Member or any other person.

7.     DISSOLUTION AND TERMINATION

       (a)     Company will dissolve upon the earlier of:

               (i)    Approval of dissolution by Member; or

               (ii)   Upon such time as Company has no members.

     (b)     Neither the death, incompetency, or bankruptcy of Member nor the assignment of
Member’s entire membership interest will dissolve Company.




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        (c)     Upon the dissolution of Company, the affairs of Company must be wound up by
Member. Before winding up the affairs of Company, a full account of the assets and liabilities of
Company must be taken by Member, and the assets of Company must then be promptly
liquidated. The proceeds of liquidation must first be applied to creditors of Company in
satisfaction of all liabilities and obligations of Company. Any remaining proceeds may then be
allocated to 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 thereto 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, Member or its
respective agents, servants, and employees, in carrying out their 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 Member or 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 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.

9.5    The provisions of this Agreement are intended only for the regulation of relations as
between Member and 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 Company.




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       IN WITNESS THEREOF, the parties have hereunto set their hands and acknowledged
this Agreement effective as the date first set forth above.


MEMBER:

By: _______________________________          Date: _____________


COMPANY:

By: _______________________________          Date: _____________




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ver, 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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DOCUMENT INFO
Description: This is a sample Single Member Limited Liability Company Operating Agreement that can be modified to fit any type of business. Limited Liability Companies (“LLC”) are often the most beneficial classification for business entities because they provide for the limited liability of corporations while having the benefits of partnership taxation. In order for the LLC to be valid, it must have an operating agreement and must file the Articles of Organization with the Secretary of State. This sample operating agreement is ideal for small businesses that want to operate as an LLC.
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