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					                                    Re: LLC Operating Agreement

Re: LLC Operating Agreement


     • From: "McGyver" <Greyprof@xxxxxxx>
     • Date: Thu, 21 Jun 2007 15:49:56 GMT

<vox600@xxxxxxxxx> wrote in message

       I have been reading everything that I can find on forming an LLC (for
       the purpose of also obtaining an auto dealers license in my State of
       Missouri). I have read many sample operating agreements and understand
       the concepts put forth. I am still having problems discerning what I
       need to draft for my particular situation.

       I would like to have a single member LLC but in the auto dealership
       would like to
       work with one of my son−in−laws.

       We will work somewhat independently, possibly going to auto auctions
       at different times.
       I would like to maintain individual profits according to each persons
       volume of
       work. (i.e. autos I sell are my profits and what he sells are his). At
       the end of the
       established financial periods, if I generated 60% of the profits and
       him 40% then
       that's how it would be carried over to our personal profits or losses
       (if he's a member) and possibly a small mandatory % of each sale
       remaining in the business for operating costs and
       expenses. I am looking for the simple verbiage to draft this, i.e.
       listed as "Commissions' etc. Without him as a member, I imagine he
       would need to be listed as an employee of the LLC/business working on
       as I said commission.

       Basically if I am putting in the effort to form this business and put
       up the operating capital, etc., I want sole control. I am just trying
       to help out my daughter and husband with some extra income but don't
       want to over complicate things. If the operating agreement turns out
       to be more of a headache trying to define the financial structure, or
       by having employee's instead of a partners/members then I will
       continue to look at the more standard arrangements.

You should form a single member LLC. Make your son−in−law and employee or

Re: LLC Operating Agreement                                                             1
                                      Re: LLC Operating Agreement
independent contractor, not a member. There is no need to give him any
ownership interest under the facts you posted. You should always be stingy
with equity. Helping out your daughter and your son−in−law is best done by
providing a job. Never give up equity unless you are raising investment
capital, and even then, be stingy.

The operating agreement is pretty simple because there is only one member.
The most important terms are the taxation terms, and you should consult your
cpa or other tax advisor on that issue. The cpa might also be a good source
of a form of operating agreement. If you are going to do the drafting
yourself, I recommend that you draft the operating agreement in such a way
that no new member can ever be added without drafting a completely different
operating agreement. The reason for that advice is that a single member
operating agreement can be kept simple, except for the tax terms. There
will be no clauses concerning voting rights or restrictions on transfer, for
example. If you make it versatile enough to be used as a multimember
operating agreement, it becomes complex and you should not be drafting it

I suggest that you should not be overly concerned with chiseling the
government out of the employer's share or social security taxes and the
like. If your son−in−law isn't earning enough for you to make those costs
inconsequential, you need a better employee. If you want information on
what is or isn't an independent contractor, start with the IRS publication
on the subject. And the internet has tons of articles on the point.

As for how to pay an employee while you don't have much cash flow, one
solution is to put your employee on straight commission with minimum wage as
a floor. Use a written agreement, drafted by an attorney.

This answer must not be relied on as legal advice for the reasons posted
here: . And I am not your attorney.



Re: LLC Operating Agreement                                                    2

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