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Member Managed LLC Agreement

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Member Managed LLC Agreement Powered By Docstoc
					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


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   ____________ [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:



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       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


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       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


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           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


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    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.


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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.


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   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.



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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]




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Annex 1


   Name              Address               Initial Capital   Membership Interest
                                            Contribution

_________ ____________ $____________________ _________________
                                                   percent


_________ _____________ $____________________ _________________
                                                    percent

_________ _____________ $____________________ _________________
                                                   percent




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DOCUMENT INFO
Description: 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 is also part of a package LLC Operating Agreement Starter Kit 14 Documents Included