Alberty Publishing Online: Item Detail

Price: $50.00
Revised: July 1, 2008 - 39 pages

Description:
Form 2.7 is an operating agreement for a limited liability company providing for a preferred return to certain members. Preferred return provisions may be appropriate where one or more members are contributing substantial amounts of property or cash and other members are contributing services for all or part of their interests. The preferred return insures that the members contributing cash or property will receive a minimum rate of return on their capital from profits of the company before the members contributing services are entitled to share in the profits. Because the preferred return creates special allocations for federal income tax purposes, this form contains provisions supporting special allocations. This form is for a member managed LLC and is based upon a partnership model of management and operation. In order to create a management structure that can accommodate several members and members holding different types of interests, provision is made for the appointment of a managing member. This permits members to have a voice in management while leaving day-to-day management decisions to a managing member.

Features:

Buy-sell provisions, dissociation - Operating agreement gives the LLC and the other members the option to purchase the interest of a member who has been expelled.
Buy-sell provisions, purchase price - Operating agreeement provides that the purchase price for a member's interest is to be determined by agreement or appraisal by a single appraiser.
Buy-sell provisions, terms - operating agreement provides that the purchase price for a member's interest is to be paid in installments over five years and is to secured with the interest being sold.
Dissociation - Operating agreement provides that the death, disability, or dissolution of a member does not cause dissolution of the LLC, but the expulsion of a member dissolves the LLC unless the LLC or other purchase the expelled member's interest.
Distributions, allocation - Operating agreement provides that current distributions are to be made first to members with preferred return rights, and after those rights are satisfied to all members in proportion to their percentage interests.
Distributions, required - Operating agreement requires annual distribution of net cash flow.
Management - Operating agreement for member managed LLC.
Managing member - Operating agreement appoints a managing member who is responsible for the day-to-day management of a member-managed LLC and is to serve until his or her death, incapacity, removal, or resignation.
Members, classes - Operating agreement provides that the promoter member and the investor members have differing rights and responsibilities.
Preferred return - Operating agreement provides that certain members are entitled to a return at a given percentage rate on their unreturned capital contributions.
Profits and losses - Operating agreement provides that current distributions are to be made first to members with preferred rights, and after those rights are satisfied to all members in proportion to their percentage interests.
Securities laws - Operating agreement contemplates that members' interests are securities, subject to state and federal securities laws.
Special allocations, profits and losses - Operating agreement allocates profits and losses to members based on their rights to a preferred return (and not in a manner proportionate to their capital contributions) and specially allocates losses to enable members to use the greatest possible amount of losses for federal income tax purposes.
Special allocations, qualified income offset and minimum gain chargeback - Operating agreement contains both a qualified income offset and a minimum gain chargeback in order to insure that the LLC's special allocations are given effect for tax purposes.
Term - Operating agreement provides that the LLC will exist only for a specified term of years.

FORM 2.7— Operating Agreement for Member Managed LLC with Preferred Return