This document sets forth an operating agreement for a member managed LLC, as opposed to a manager managed LLC. As drafted, this LLC operating agreement is geared toward formation under California state laws, however it can be modified for LLCs seeking to form under other states' laws. The agreement states that the business of the company will be conducted and managed by the LLC's members and that the members have equal rights to manage the operations and affairs of the company. This template operating agreement can be customized to fit the needs of the drafting parties.
This document sets forth an operating agreement for a member managed LLC, as opposed to a manager managed LLC. As drafted, this LLC operating agreement is geared toward formation under California state laws, however it can be modified for LLCs seeking to form under other states' laws. The agreement states that the business of the company will be conducted and managed by the LLC's members and that the members have equal rights to manage the operations and affairs of the company. This template operating agreement can be customized to fit the needs of the drafting parties. OPERATING AGREEMENT OF _____________________________, LLC, A ________________ [Comment: insert State] LIMITED LIABILITY COMPANY This OPERATING AGREEMENT, dated ___________________ (the “Agreement”), is between the Members ___________________, [Comment: set forth all Members’ names] (collectively referred to as the “Members” and individually as a "Member"), and as listed on the signature page. The Members desire to form a limited liability company pursuant to the laws of the State of ___________ and agree as follows: I. THE LIMITED LIABILITY COMPANY 1. Formation. A limited liability company (the "Company") subject to the ________________ [the laws of the State of _____________] or [provisions of the Beverly-Killea Limited Liability Company Act of California] (the "Act") as currently in effect ___________________ [Comment: insert “has been” or “will be”] formed under the Act. [Comment and Instruction: Choose one. This Statute is particular to the laws of the State of California as pertains to limited liability companies. If you have formed or are forming a limited liability company in another State you might want to strike the portion specifying the law particular to California and use the first option, or determine the statute that is particular to the state of your limited liability company. Or better yet, you should review whether a similar document for another state is available for purchase on Docstoc, because it might have other or additional particular provisions that are specific and applicable to the laws of that state.] 2. Filing. In connection with the execution of this Agreement, the Members ___________________ [Comment: insert “have caused” or “will cause”] Articles of Organization (the “Articles”) that comply with the Act to be properly filed with the ____________ [Comment: insert State] Secretary of State, and will execute such further documents (including amendments to the Articles) and take such further action as is appropriate to comply with the requirements of law for the formation and operation of a limited liability company in all places where the Company may conduct its business. 3. Name. The name of the Company is _____________________, LLC. The Company will transact business under that name. 4. Company Purpose. The purpose of the Company is to engage in ________________ [Comment: insert “any business activity permitted by the Act” or describe the nature of the business]. 5. Operative Date of Agreement. The provisions of this Agreement shall take effect on © Copyright 2011 Docstoc Inc. registered 2 ____________ [Comment: insert date]. 6. Registered Office. The Company shall maintain an office in California as required by the Act at which it shall maintain the records required to be maintained there by the Act. The Company may have such other offices as the Members may determine, within or without the State of California and any such office may be the Company's principal place of business, as determined by the Members. 7. Agent. The Company's initial agent for service of process required by the Act is as set forth in the Articles and may be changed if and as determined by the Members. 8. Duration; Events of Dissolution. The Company shall be dissolved on the date set forth in the Articles, if any, unless sooner dissolved by: A. The happening of events specified in this Agreement; B. The affirmative vote of ___________________ [Comment: insert “all Members” or “Members whose Membership Interest equals more than _________________ percent”]; or C. Any event that makes it unlawful for the business of the Company to be carried on by the Members. 9. Management of Business. The business of the Company will be conducted by the Members, and is more fully described in Article 4. 10. Definitions. As used in this Agreement, the following terms have the following meanings: "Code" means the Internal Revenue Code of 1986, as it may be amended or superseded from time to time. "Membership Interest," as to each Member, means each Member's percentage interest in the Company as set forth in Annex 1. "Profits" and "Losses" mean respectively, for each fiscal year or other period, an amount equal to the Company's taxable income or loss for such year or period. II. MEMBERS. 1. Member Information: © Copyright 2011 Docstoc Inc. registered 3 A. ___________________________________________________________ B. ___________________________________________________________ C. ___________________________________________________________ D. ___________________________________________________________ [Comment: insert names and addresses of members.] The name, full business or residence street address, initial capital contribution, and Membership Interest of each Member are as set forth in Annex 1 to this Agreement. If a person becomes a Member by admission as such pursuant to action of the Members or as a Member's assignee as provided in Agreement, that person becomes a party to this Agreement by executing and delivering to the Members a supplement to this Agreement in such form as determined by the Members. The supplement shall show: (a) the full name and address of the new Member; (b) the Capital Contribution, if any, to be made by the new Member; (c) the Membership Interest of the new Member; and (d) any adjustments in the Membership Interests of other Members resulting from the admission of the new Member. By executing and delivering the supplement, the new Member becomes a party to this Agreement without further action. 2. Additional Contributions. No Member will be obligated to make any additional contribution to the Company. No Member may make an additional contribution to the Company without the prior written consent of ___________________ [Comment: insert “all other Members” or “other Members whose Membership Interests equal more than ____________________ percent of the Membership Interests of all Members”]. 3. Capital Accounts. A Capital Account shall be maintained for each Member. The Capital Account of each Member will be credited initially with the amount of capital contributed to the Company by that Member. Thereafter, each Member's Capital Account will be credited with that Member's share of Profits and the amount of any additional capital contributed to the Company by that Member, and will be debited with that Member's share of Losses and the amount of any cash distributed to that Member. III. PROFITS, LOSSES AND DISTRIBUTIONS. 1. Profits and Losses. The Profits and Losses of the Company shall be allocated among the Members in accordance with their Membership Interests. 2. Distributions. The Members shall distribute available funds to the Members, in proportion to their Membership Interests, as determined by the Members. "Available funds" for this purpose means the Company's gross cash receipts (other than cash funds obtained as contributions to the Company by its Members and cash funds, if any, obtained from loans to the Company), less the Company's operating expenses including provisions for payment of outstanding and unpaid current obligations of the Company as of such time, and less the amount that, in the Members' reasonable judgment, the © Copyright 2011 Docstoc Inc. registered 4 Company should retain in order to fulfill its business purposes. IV. MANAGEMENT 1. Members. The liability of the Members shall be limited as provided in the Act, which generally provides that no Member is personally liable for the debts, obligations, or liabilities of the Company. 2. Authority of Members. Except as otherwise provided in this section or Section “Certain Decisions,” the Members have equal rights to manage the operations and affairs of the Company and to make all decisions regarding the Company and the business of the Company. Subject to Section “Certain Decisions,” any action approved by a majority measured by Membership Interests of the Members will constitute the act of and will bind the Company. The signature of any Member authorized to do so by such approval is sufficient to bind the Company with respect to the matter or matters so approved. No member acting alone without such approval may bind the Company to any agreement with or obligation to any third party or represent or claim to have the ability to do so. The Members will not be required to hold meetings to make management decisions but may do so if desired, according to Section “Meetings and Consents of Members.” 3. Other Activities; Affiliates. A. Members are not required to manage the Company as their sole and exclusive function and each Member may have other business interests and may engage in other activities, in addition to those relating to the Company, including the making or management of other investments. Each Member recognizes that each other Member may have an interest in investing in, operating, and otherwise using various kinds of property for profit, and engaging in any and all activities related or incidental thereto and that each Member will make other investments consistent with such interests. Neither the Company nor any Member by virtue of this Agreement will have any right in or to any other ventures or activities in which any other Member is involved or to the income or proceeds derived from such other ventures or activities. The pursuit of other ventures and activities by each Member, even if competitive with the business of the Company, is hereby consented to by each Member and will not be deemed wrongful or improper. Except as otherwise provided in this Agreement, neither any Member nor any Affiliate of a Member will be obligated to present any particular investment opportunity to the Company, even if such opportunity is of a character that, if presented to the Company, could be taken by the Company, and each Member and each Affiliate of a Member will have the right to take for its own account, or to recommend to others, any such particular investment opportunity. B. "Affiliate(s) of a Member" means (1) any partners in that Member; (2) any person that directly or indirectly (including through any related entity) or in a fiduciary capacity controls, is controlled by, or is under common control with that Member or © Copyright 2011 Docstoc Inc. registered 5 any general partner in that Member; or (3) any other person of which 5 percent or more of the equity interest is held beneficially or of record by that Member or any general partner in that Member. "Affiliate" also includes any officer or director of that Member, a spouse, ancestor, or descendant of such officer or director or a trust for the benefit of any of the foregoing. For purposes of this definition, the term "control" means the possession, directly or indirectly, of the power to cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, family relationships, or otherwise. [Comment: user may instead set forth that “A. Each Member (1) may engage in incidental other business activities that do not compete with the Company or interfere with the Member's services to the Company, and may engage in personal investment activities in enterprises not directly competitive with the Company.”] 4. Certain Decisions. Except as otherwise provided below in this section, decisions of the Members shall be made by a majority measured by the Membership Interests of all Members. Notwithstanding the foregoing, however, to the fullest extent permitted by law, the following matters require the mutual agreement of all of the Members: A. A change in the purposes or the nature of the business of the Company; B. The admission or withdrawal of Members or a change in their Membership Interests in any manner other than as provided in this Agreement; C. The dissolution of the Company other than as provided in this Agreement; D. Any amendment to this Agreement; E. The incurrence or prepayment of any debt for borrowed money by the Company in excess of $____________________; F. Any purchase of capital assets or other properties for the Company in excess of $____________________ G. Changes in tax elections and accounting policies of the Company. H. ___________________ [Comment: Include any other matters as required]. 5. Meetings and Consents of Members. Actions of Members may be taken at meetings, by written consent of all Members, or otherwise as agreed among the Members. If action is taken at a meeting, an appropriate record of the action taken shall be retained in the Company's records. Meetings of Members may be called by any ________________ [Instruction: insert any number◊] Members or not less than ________________ [Instruction: insert any number◊] percent measured by Membership. Reasonable notice shall be given to each Member of any meeting of Members, and such notices shall be deemed reasonable if it briefly specifies the nature of the matters to be presented at the © Copyright 2011 Docstoc Inc. registered 6 meeting, and is sent or delivered in a manner that in the ordinary course of business would be received by each Member not less than ___________________ [Instruction: insert any number◊] days before the day of the meeting. 6. Information Relating to Company. Any Member is entitled to receive any information regarding the Company or its activities. Each Member or authorized representative shall be given access to and may inspect and copy all books and records regarding the Company or its activities. The requesting Member shall be responsible for all such expenses related to the rights contained in this Section. 7. Exculpation. No act or omission of the Members, the effect of which may cause or result in loss or damage to the Company or the Members, if done in good faith to promote the best interests of the Company, shall subject the Members acting or failing to act to any liability to the Members. 8. Records at Principal Place of Business. The Company shall keep at its principal place of business the following: A. A current list the full name and address of each Member and each holder of an economic interest in the Company, together with the contribution and share in profits and losses of each Member and holder of economic interest; B. A copy of the Articles and all amendments thereto; C. Copies of the Company's federal, state, and local income tax returns and reports, if any, for the six most recent years; D. A copy of this Agreement; E. Copies of financial statements of the Company for the six most recent years; and F. The books and records of the Company as they relate to internal affairs for at least the current and past four fiscal years. V. COMPENSATION. 1. Compensation. Unless otherwise agreed among the Members, no Member shall receive any payment or compensation for performing the obligations under this Agreement or for providing management services to the Company. 2. Reimbursement of Expenses. The Company shall reimburse Members for all reasonable, direct out-of-pocket expenses incurred by such Member in managing the Company. VI. ACCOUNTS. © Copyright 2011 Docstoc Inc. registered 7 1. Books. Complete and accurate accounting books for the Company shall be maintained at the Company's principal place of business. These books are to be kept on an accounting method acceptable for tax or other applicable regulatory purposes as the Members may select. The Company's accounting period is the calendar year. 2. Reports. The books of account are to be closed after the close of each calendar year. Each Member shall promptly be sent a statement of the Member's distributive share of income and expense for federal income tax reporting purposes. 3. Tax Matters. ___________________ [Comment: insert name] will be the tax matters partner for all purposes of the Code. VII. TRANSFERS; NEW MEMBERS. 1. Assignment. A Member's interest in the Company may be assigned only with the consent of all or ____________________ [Instruction: insert any number◊] percent measured by Membership Interests of the other Members. 2. Substitution of Transferee as Member. Notwithstanding anything to the contrary in this Agreement, no transferee, assignee, purchaser, designee, or legal representative of a Member may become a Member without the consent of all or ___________ [Instruction: insert any number◊] percent of the Membership Interests of the other Members. If consent is not granted, the transferee, assignee, purchaser, designee, or legal representative of a Member, except as otherwise required by law, shall have no right to participate in the management of the business and affairs of the Company and shall be entitled only to receive the economic interest to which that Member would otherwise be entitled and which was assigned. As further conditions to admission as a Member any transferee, assignee, purchaser, designee, or legal representative of a Member shall (a) execute and deliver such instruments, in form and substance satisfactory to the Members, as the Members deem necessary or desirable to cause the transferee to become a Member, including but not limited to the supplement to this Agreement, Annex 1, and (b) pay all reasonable expenses in connection with admission as a Member, including but not limited to the cost of preparation and filing of any supplement to this Agreement referred to above and any other amendment of this Agreement or the Articles or of taking any other action necessary in connection therewith. 3. Admission of New Members. Additional persons may be admitted as Members of the Company upon the affirmative vote of all Members or Members whose Membership Interests equal more than ____________________ [Instruction: insert any number◊] percent of all Membership Interests. Concurrently with admission of a person as a Member, that new Member shall execute and deliver the supplement described in Annex 1. VIII. DISSOLUTION AND TERMINATION. © Copyright 2011 Docstoc Inc. registered 8 1. Final Accounting. In case of the Company's dissolution, an accounting shall be made from the date of the last previous accounting to the date of dissolution. 2. Liquidation. On the Company's dissolution, the then remaining Members or a person selected by a majority measured by Membership Interests of the Members shall act as liquidator to wind up the Company. The person acting as liquidator shall act in accordance with the Act. The liquidator shall have full power and authority to sell, assign, and encumber any or all of the Company's assets and to wind up and liquidate the Company's affairs in an orderly and prudent manner. The liquidator shall distribute all proceeds from liquidation to the Members, after payment or provision for all obligations of the Company, in accordance with their Membership Interests. 3. Distribution in Kind. If the Members, or the liquidator, with the consent of a majority measured by Membership Interests of all Members, determine that a portion of the Company's assets should be distributed in kind to the Members, the liquidator shall distribute the same to the Members in undivided interests as tenants in common in proportion to their Membership Interests. 4. Certificates of Dissolution and Cancellation. Upon dissolution of the Company, if and as required by the Act, the members shall cause a certificate of dissolution to be filed. On completion of the Company's winding up and distribution of its assets, the Company shall be terminated, and a majority measured by Membership Interests of all Members shall cause a certificate of dissolution and a certificate of cancellation of articles to be filed as required by the Act and take such other actions as may be necessary to terminate the Company. IX. NOTICES. 1. Method for Notices. Except as otherwise expressly provided in this Agreement, all notices hereunder shall be sent by first class mail, postage prepaid, and addressed to a Member at the current address of the Member as set forth in the records of the Company (except that any Member may change the address for such purpose by providing written notice to the Company), and are effective on the date of receipt or on the fifth day after mailing, whichever is earlier. 2. Computation of Time. In computing any period of time under this Operating Agreement, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed is included, unless it is a Saturday, Sunday, or legal holiday, in which event the period will run until the end of the next day that is not a Saturday, Sunday, or legal holiday. X. MISCELLANEOUS PROVISIONS. © Copyright 2011 Docstoc Inc. registered 9 1. Entire Agreement. This Operating Agreement (a) contains the entire agreement among the parties, (b) except as otherwise expressly provided in this Agreement, may not be amended and no rights hereunder be waived except by an instrument in writing signed by the party sought to be charged with such amendment or waiver, (c) will be construed in accordance with, and governed by, the laws of _________, [Comment: insert State] and (d) is binding on and inures to the benefit of the parties and their respective personal representatives, successors, and assigns, except as above set forth. No document that purports to amend, supplement, or replace this Agreement will be effective to do so unless it specifically refers to this Agreement, specifically states its effect on this Agreement, and is signed by all Members of the Company. 2. Construction Principles. Words in any gender are deemed to include the other genders. The singular is deemed to include the plural and vice versa. The headings and underlined paragraph titles are for guidance only and have no significance in the interpretation of this Operating Agreement. IN WITNESS WHEREOF, the Members have signed this Operating Agreement as of the date first above written. ___________________ [Comment: insert signature] ___________________ [Comment: print name] ___________________ [Comment: insert signature] ___________________ [Comment: print name] ___________________ [Comment: insert signature] ___________________ [Comment: print name] © Copyright 2011 Docstoc Inc. registered 10 Annex 1 Name Address Initial Capital Membership Interest Contribution _________ ____________ $____________________ _________________ percent _________ _____________ $____________________ _________________ percent _________ _____________ $____________________ _________________ percent © Copyright 2011 Docstoc Inc. registered 11
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