**LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
[COMPANY NAME], LLC
(a Delaware Limited Liability Company)**
[Effective Date: ____]
TABLE OF CONTENTS
- Document Header
- Definitions
- Formation; Name; Term
- Purpose & Powers
- Capital Contributions; Units; Capital Accounts
- Management & Voting
- Distributions
- Tax Treatment & Accounting
- Books, Records, and Information Rights
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation (Indemnification; Liability Limitations; Insurance)
- Transfers of Interests
- Dissolution & Winding-Up
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
1.1 Parties
This Limited Liability Company Operating Agreement (this “Agreement”) is entered into by and among:
a. [Member 1 Legal Name], a [state] resident/entity,
b. [Member 2 Legal Name], …, and
c. [Additional Members, if any] (collectively, the “Members,” and each individually, a “Member”),
with reference to the following facts and intentions (the “Recitals”).
1.2 Recitals
A. The Members formed [Company Name], LLC, a Delaware limited liability company (the “Company”), pursuant to the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq. (as amended, the “Act”).
B. The Members desire to set forth their respective rights and obligations and the terms governing the Company.
C. The Members intend that the Company be treated as a [check one: ☐ partnership ☐ disregarded entity ☐ corporation] for U.S. federal and applicable state income tax purposes.
NOW, THEREFORE, the Members agree as follows:
2. DEFINITIONS
[// GUIDANCE: Define only terms that are used more than once; ensure consistent capitalization.]
“Act” – The Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq.
“Adjusted Capital Account” – The balance in a Member’s Capital Account …
“Affiliate” – With respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person.
“Agreement” – This Operating Agreement, as amended.
“Capital Contribution” – The total value of cash, property, or services contributed …
“Company” – [Company Name], LLC.
“Distributable Cash” – Cash determined by the Managers to be available …
“Manager” – Any Person appointed under Section 6.2 to manage the business …
“Member” – Each Person executing this Agreement as a Member and any Substitute Member.
“Percentage Interest” – A Member’s relative ownership, initially as set forth on Exhibit A.
“Person” – Any individual, partnership, corporation, trust, limited liability company, or other entity.
“Taxable Year” – The Company’s fiscal year for federal income tax purposes.
3. OPERATIVE PROVISIONS
3.1 Formation; Name; Term
a. Formation. The Company was formed on [Formation Date] by filing a Certificate of Formation with the Delaware Secretary of State in accordance with the Act.
b. Name. The business of the Company shall be conducted under the name “[Company Name], LLC” or such other name as the Members may approve.
c. Term. The Company shall continue in existence until dissolved as provided herein.
3.2 Purpose & Powers
The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Act and to do all things necessary or incidental thereto.
3.3 Principal Office & Agent
The principal office shall be located at [Address]. The Company’s registered agent in Delaware is [Registered Agent Name] at [Registered Agent Address].
4. CAPITAL CONTRIBUTIONS; UNITS; CAPITAL ACCOUNTS
4.1 Initial Capital Contributions. Each Member has contributed the amount set forth opposite such Member’s name on Exhibit A.
4.2 Additional Contributions. No Member shall be obligated to make additional Capital Contributions without such Member’s prior written consent.
4.3 Units & Percentage Interests. Interests shall be represented by limited liability company units (“Units”). The initial number of Units and Percentage Interests are set forth on Exhibit A.
4.4 Capital Accounts. A separate Capital Account shall be maintained for each Member in accordance with Treasury Reg. § 1.704-1(b)(2)(iv).
4.5 Loans. Any Member may make loans to the Company on such terms as approved by the Members holding a majority of the Percentage Interests (“Majority Members”). Loans are not Capital Contributions.
5. MANAGEMENT & VOTING
5.1 Management Structure. The Company shall be [check one: ☐ Member-managed ☐ Manager-managed].
a. Member-Managed. Each Member is a “Manager” for purposes of the Act.
b. Manager-Managed. The Members hereby appoint the following initial Manager(s): [Name(s)].
5.2 Authority of Manager(s). Subject to the limitations in this Agreement, the Manager(s) shall have full, exclusive authority to manage the Company. Actions outside the ordinary course require approval of the Majority Members.
5.3 Fiduciary Duties; Waiver. To the fullest extent permitted by the Act, the Manager(s) and Members hereby waive all fiduciary duties except the implied contractual covenant of good faith and fair dealing. [// GUIDANCE: Modify if fiduciary duties are to be retained.]
5.4 Voting. Except as otherwise provided herein, actions requiring Member approval shall be authorized by Members holding a majority of the Percentage Interests.
5.5 Meetings; Written Consents. Meetings may be called by any Manager or Members holding at least 25% of the Percentage Interests on not less than five (5) Business Days’ prior notice. Actions may be taken without a meeting upon written consent of the required Members.
6. DISTRIBUTIONS
6.1 Timing. Distributions of Distributable Cash shall be made at such times as determined by the Manager(s).
6.2 Priority. Distributions shall be made:
i. First, to redeem any Tax Advances (Section 8.4);
ii. Second, to the Members in proportion to their Percentage Interests.
6.3 Limitation. No distribution shall be made if prohibited under the Act or other applicable law.
7. TAX TREATMENT & ACCOUNTING
7.1 Tax Classification. The Members elect that the Company be taxed as a [partnership/disregarded entity/corporation] pursuant to the “check-the-box” regulations.
7.2 Tax Matters Partner / Partnership Representative. [Name] is designated the “Partnership Representative” under IRC § 6223.
7.3 Tax Returns. The Manager(s) shall cause the preparation and timely filing of all tax returns.
7.4 Tax Advances. The Company may make advances to Members to cover their estimated tax liabilities arising from allocations of Company income (“Tax Advances”). Advances shall be treated as distributions and shall reduce future distributions.
8. BOOKS, RECORDS, AND INFORMATION RIGHTS
8.1 Maintenance. The Company shall maintain complete and accurate books in accordance with GAAP (or other method selected by the Manager(s)).
8.2 Inspection. Each Member and its representatives may, for purposes reasonably related to such Member’s interest, inspect the Company’s books upon five (5) Business Days’ prior written notice during normal business hours.
8.3 Confidentiality. Members shall keep confidential all non-public information obtained from the Company.
9. REPRESENTATIONS & WARRANTIES
Each Member represents and warrants to the Company and the other Members that:
a. Organization & Authority. If not an individual, such Member is duly organized and in good standing.
b. Power & Authorization. Such Member has full power to execute this Agreement.
c. No Conflicts. Execution of this Agreement does not violate any agreement binding on such Member.
d. Sophistication; Investment Purpose. Such Member is acquiring its Units for investment and not with a view to distribution.
Survival. The representations and warranties shall survive the execution of this Agreement and any subsequent Capital Contribution.
10. COVENANTS & RESTRICTIONS
10.1 Affirmative Covenants of the Company. The Company shall:
a. Maintain its existence and good standing in Delaware and any jurisdiction in which it does business;
b. Maintain accurate books and timely file all required tax returns;
c. Maintain appropriate insurance in accordance with Section 13.3.
10.2 Negative Covenants. Without approval of the Majority Members, the Company shall not:
a. Merge, consolidate, or effect any fundamental change;
b. Incur indebtedness exceeding [Threshold] in any fiscal year;
c. Make distributions contrary to Section 6.
10.3 Member Non-Compete [optional]. For so long as a Member holds Units and for [X] years thereafter, such Member shall not …
10.4 Notice of Material Events. The Manager(s) shall promptly notify the Members of any material litigation, regulatory inquiry, or event reasonably expected to have a material adverse effect.
11. DEFAULT & REMEDIES
11.1 Events of Default. An “Event of Default” occurs if:
a. A Member materially breaches this Agreement and fails to cure within thirty (30) days after notice;
b. A Member becomes bankrupt or insolvent;
c. A Member engages in fraud or willful misconduct with respect to Company matters.
11.2 Remedies. Upon an Event of Default, the non-defaulting Members may:
i. Suspend the defaulting Member’s voting rights;
ii. Deduct damages from distributions;
iii. Compel a forced sale of the defaulting Member’s Units at Fair Market Value less a [Discount]% default penalty;
iv. Seek specific performance, injunctive relief, or damages.
11.3 Attorneys’ Fees. The prevailing party in any dispute arising under this Agreement shall be entitled to recover its reasonable attorneys’ fees and costs.
12. RISK ALLOCATION
12.1 Indemnification of Members and Managers
To the fullest extent permitted by the Act, the Company shall indemnify and hold harmless each Member, Manager, officer, and their respective Affiliates (each, an “Indemnified Party”) from and against any and all claims, losses, liabilities, damages, or expenses arising out of their status or activities on behalf of the Company, except for acts or omissions constituting bad faith, fraud, or willful misconduct. Advancement of expenses shall be made within thirty (30) days of written request, subject to an undertaking to repay if indemnification is ultimately determined to be unavailable.
[// GUIDANCE: Delaware § 18-108 expressly authorizes indemnification; broaden or narrow as desired.]
12.2 Limitation of Liability
No Indemnified Party shall be liable to the Company or any Member for monetary damages for any act or omission except to the extent the act or omission constitutes bad faith, fraud, or willful misconduct. In any event, the aggregate liability of any Indemnified Party shall not exceed the amount of distributions actually received by such Indemnified Party from the Company during the twelve (12) months preceding the event giving rise to liability.
12.3 Insurance
The Company shall maintain directors’ and officers’/managers’ liability insurance and such other coverage as the Manager(s) deem appropriate. The cost of such insurance shall be borne by the Company.
12.4 Force Majeure
No party shall be liable for failure to perform due to events beyond its reasonable control, including acts of God, war, terrorism, pandemic, or governmental action, provided that such party gives prompt notice and uses commercially reasonable efforts to resume performance.
13. TRANSFERS OF INTERESTS
13.1 General Restriction. No Member may Transfer Units except in compliance with this Section 13.
13.2 Permitted Transfers. A Member may Transfer all or part of its Units to:
a. An Affiliate;
b. A trust for estate-planning purposes;
c. Another Member, subject to Majority Member consent.
13.3 Right of First Refusal (“ROFR”). If a Member (the “Transferring Member”) receives a bona fide third-party offer, the Company and the non-transferring Members shall have a thirty (30)-day ROFR to purchase the offered Units on the same terms.
13.4 Drag-Along; Tag-Along. If Members holding at least [Drag Threshold]% of the Units approve a Sale of the Company, they may compel the remaining Members to sell (Drag-Along) on the same terms, provided that each dragged Member receives identical consideration. Minority Members shall have Tag-Along rights in any sale of a controlling interest.
13.5 Admission of Substitute Members. A transferee shall be admitted as a Substitute Member only with the consent of the Majority Members and upon execution of a Joinder Agreement.
14. DISSOLUTION & WINDING-UP
14.1 Events of Dissolution. The Company shall dissolve upon the earliest of:
a. Approval of Members holding at least [Dissolution Threshold]% of the Units;
b. Entry of a decree of judicial dissolution under § 18-802 of the Act;
c. Sale of all or substantially all of the Company’s assets.
14.2 Winding-Up. The Manager(s) (or a liquidating trustee appointed by the Members) shall liquidate the Company’s assets, satisfy liabilities (including Members’ loans), and distribute remaining proceeds in accordance with positive Capital Account balances.
14.3 Certificate of Cancellation. Upon completion of winding-up, the Manager(s) shall file a Certificate of Cancellation with the Delaware Secretary of State.
15. DISPUTE RESOLUTION
15.1 Governing Law. This Agreement and all claims arising hereunder shall be governed by and construed in accordance with the laws of [☐ Delaware / ☐ Other Chosen Jurisdiction] without regard to its conflict of laws principles.
15.2 Forum Selection. The parties irrevocably submit to the exclusive jurisdiction of the state and federal courts located in [County, State] for any action arising out of or relating to this Agreement, except as otherwise provided in Section 15.3.
15.3 Arbitration (Optional). Any dispute, controversy, or claim not resolved within thirty (30) days after notice may, upon mutual written election of the disputing parties, be finally settled by binding arbitration administered by [Arbitral Institution] in accordance with its rules. Judgment upon the award may be entered in any court of competent jurisdiction.
15.4 Jury Trial Waiver (Optional). EACH PARTY HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.
15.5 Injunctive Relief. Notwithstanding the foregoing, any party may seek interim or permanent injunctive relief, specific performance, or other equitable remedies in any court of competent jurisdiction to prevent actual or threatened breach.
16. GENERAL PROVISIONS
16.1 Amendments. This Agreement may be amended only by a written instrument executed by Members holding at least [Amendment Threshold]% of the Units, except that any amendment that disproportionately and adversely affects any Member requires the written consent of such Member.
16.2 Waivers. No waiver shall be effective unless in writing and signed by the waiving party. A waiver on one occasion shall not be deemed a waiver of any future breach.
16.3 Assignment. No party may assign this Agreement or its rights or obligations hereunder except as expressly permitted in Section 13.
16.4 Successors & Assigns. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
16.5 Severability. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force, and the court shall modify the invalid provision to the minimum extent necessary to render it valid.
16.6 Integration. This Agreement, including all Exhibits and Schedules, constitutes the entire agreement among the parties and supersedes all prior agreements, oral or written, relating to its subject matter.
16.7 Counterparts; Electronic Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original. Signatures transmitted by facsimile, PDF, or other electronic means shall be deemed original signatures.
16.8 Notices. All notices shall be in writing and delivered by personal delivery, nationally recognized overnight courier, certified mail (return receipt requested), or email (with confirmation of receipt) to the addresses set forth on Exhibit A (or such other address as a party may designate).
17. EXECUTION BLOCK
IN WITNESS WHEREOF, the undersigned have executed this Operating Agreement as of the Effective Date first above written.
| MEMBER/MANAGER | SIGNATURE | NAME & TITLE | DATE |
|---|---|---|---|
| [Member 1] | _________ | [Printed Name] | __ |
| [Member 2] | _________ | [Printed Name] | __ |
| [Manager, if non-member] | _________ | [Printed Name] | __ |
[// GUIDANCE: Add notarization or witness blocks if required by local practice; Delaware does not mandate notarization for an LLC operating agreement.]
EXHIBIT A
Capitalization Table & Member Information
| MEMBER | UNITS | PERCENTAGE INTEREST | CAPITAL CONTRIBUTION | ADDRESS | |
|---|---|---|---|---|---|
| [Member 1] | ___ | ___ % | $___ | ___ | ___ |
| [Member 2] | ___ | ___ % | $___ | ___ | ___ |
EXHIBIT B
Form of Joinder Agreement (Substitute Member)
[Text of Joinder]
[END OF DOCUMENT]