Form: Explanation:
Annotated Long Form Operating Agreement for Manager-Managed LLC This is a 70-page comprehensive annotated Operating Agreement for a manager-managed California LLC. The annotations give guidance on drafting issues and California law. The State Bar of California, “Guide to Organizing and Operating a Limited Liability Company in California”
Source:
Form 25.1 Copyright © LegalDocs Online, Inc. All Rights Reserved. Use of this form is subject to a Terms of Use Agreement.
OPERATING AGREEMENT FOR ______________________________________ LLC A CALIFORNIA LIMITED LIABILITY COMPANY This Operating Agreement is made as of , _______, [(“Effective Date”) -- don’t use if desire the effective date specified in section 2.1] by and among the parties listed on the signature pages hereof, with reference to the following facts: A. On _____________, ________, Articles of Organization for ______________ LLC (the “Company”), a limited liability company organized under the laws of the State of California, were filed with the California Secretary of State. B. The parties desire to adopt and approve an operating agreement for the Company. OR THIS OPERATING AGREEMENT (“Agreement”) is made as of _____________, ______ (“Effective Date”), by and among __________________, ______________________, and each of those Persons who become a Company Member and/or Manager in accordance with the terms of this Agreement. RECITAL: The Members desire to enter into this Agreement for the Company to delineate their rights and liabilities as members, to provide for the Company’s management, and to provide for certain other matters, all as permitted under the Beverly-Killea Limited Liability Company Act. AGREEMENT: NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES, COVENANTS AND UNDERTAKINGS HEREIN SPECIFIED AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED LEGALLY AND EQUITABLY, THE PARTIES HERETO AGREE AS FOLLOWS:
-1-
ARTICLE I DEFINITIONS1 Capitalized terms used in this Agreement shall have the meanings specified below or elsewhere in this Agreement and when not so defined shall have the meanings specified in California Corporations Code Section 17001 (such terms are equally applicable to both the singular and plural derivations of the terms defined): 1.1 “Act” shall mean the Beverly-Killea Limited Liability Company Act, codified in the California Corporations Code, Section 17000 et seq., as the same may be amended from time to time. 1.2 “Affiliate” of a Member or Manager shall mean any Person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with a Member or Manager, as applicable. The term “control,” as used in the immediately preceding sentence, shall mean with respect to a corporation or limited liability company the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity. 1.3 “Agreement” shall mean this Operating Agreement, as originally executed and as amended from time to time. 1.4 “Articles” shall mean the Articles of Organization for the Company originally filed with the California Secretary of State and as amended from time to time. 1.5 “Assignee” shall mean the owner of an Economic Interest who has not been admitted as a substitute Member in accordance with Article VIII. 1.6 “Bankruptcy” shall mean: (a) the filing of an application by a Member for, or his or her consent to, the appointment of a trustee, receiver, or custodian of his or her other assets; (b) the entry of an order
California Corporations Code Section 17005(b)(1) provides that the definitions set forth in California Corporations Code Section 17001 may be varied by agreement only as specifically provided in Section 17001 (unless otherwise noted, all statutory references in the Footnotes are to the California Corporations Code and all references to the Act are to the BeverlyKillea Limited Liability Company Act). To the extent the following terms are defined in Section 17001, this form makes reference by Footnote to the specific subsection of Section 17001 in which such term is defined and, in most cases, repeats the definition set forth in Section 17001. However, in certain cases, this form alters the statutory definition of a term, even if Section 17001 does not permit contractual alteration of the definition. See, e.g., note 2, infra. In this regard, many practitioners believe that, notwithstanding Section 17005(b)(1), and notwithstanding that Section 17001 may not permit the definition of a particular term to be varied in the operating agreement, terms defined in Section 17001 may be defined differently in the operating agreement for purposes of the provisions of the operating agreement, so long as the contractual provisions affected by the definition are not, as a result of the varied definition, contrary to other non-waivable provisions of the Act. In any event, before relying on any definition set forth in this form, or before defining any other term not defined in this form, the practitioner must determine whether the particular term is defined in Section 17001 and, if so, whether Section 17001 permits the definition of the term to be varied in the operating agreement. If Section 17001 does not permit the definition of the term to be varied in the operating agreement but the practitioner desires a different definition for purposes of the operating agreement, then (i) the practitioner must determine the effect that varying the definition will have both on the default provisions and the non-waivable provisions of the Act, (ii) if the term, as differently defined, affects only default provisions of the Act, the practitioner must ensure that the operating agreement provisions which use the term as defined in the operating agreement actually override the Act’s default provisions which use the term as defined in the Act (since the agreement provisions and the Act provisions could be construed as using different terms), and (iii) if the term, as differently defined, affects nonwaivable provisions of the Act, the practitioner may be unable to alter the definition of the term, at least with respect to those provisions.
1
-2-
for relief with respect to a Member in proceedings under the United States Bankruptcy Code, as amended or superseded from time to time; (c) the making by a Member of a general assignment for the benefit of creditors; (d) the entry of an order, judgment, or decree by any court of competent jurisdiction appointing a trustee, receiver, or custodian of the assets of a Member unless the proceedings and the person appointed are dismissed within ninety (90) days; or (e) the failure by a Member generally to pay his or her debts as the debts become due within the meaning of Section 303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy Court, or the admission in writing of his or her inability to pay his or her debts as they become due. 2 1.7 “Capital Account” shall mean with respect to any Member the capital account which the Company establishes and maintains for such Member pursuant to Section 3.4. 3 1.8 “Capital Contribution” shall mean the total amount of cash and fair market value of property contributed [and/or services rendered or to be rendered] to the Company by Members.4
This definition is broader than the definition of “bankruptcy” set forth in Section 17001(c) and results in a greater number of events that could cause a dissolution of the limited liability company (see Section 1.13 of the Agreement) or a right to acquire a member’s interest (see Article VII