2. Operating Agreements
Operating agreements contain rules for managing an LLC and operating its business. Every LLC should have one.
We offer 12 different forms of operating agreement designed for undertakings that range from the simple to the complex. The first eight, which can be used by LLCs in a variety of businesses, are listed below. Four additional forms designed for use in special situations are in category 3.
The first two operating agreements in this category are for LLCs with only one member. One is for an LLC that is managed by its member, the other for one managed by one or more managers. How an LLC is managed is ordinarily determined by its articles of organization.
The remaining operating agreements are all for LLCs with two or more members. Forms 2.3 and 2.4 are relatively straightforward operating agreements designed for use if all members contribute money or property to an LLC and share profits, losses, and distributions in proportion to their contributions.
If an LLC’s profits, losses, or distributions are allocated in some other way, its operating agreement must include specific provisions to insure that the allocations are recognized for income tax purposes. Special allocations requiring these provisions exist, for example, if an LLC’s losses are allocated to a member in a high tax bracket or if part of its profits are allocated to a member who provides services but no capital. Forms 2.5 and 2.6 contain the basic operating agreement provisions for an LLC with special allocations.
If special allocations relate to property acquired with indebtedness for which no LLC member is personally liable, additional provisions are needed. The provisions are contained in Forms 2.7 and 2.8, which also give some members of the LLC with a priority in the allocation of profits and the distribution of money or other property. These preferred return rights are akin to those of the holder of preferred stock.
The last form in this category, Form 2.9 contains provisions for use in LLC operating agreements that are not included in other forms. It is not an operating agreement as such.
Click below to read more about or purchase a specific form:
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