LLC Operating Agreement

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

[COMPANY NAME], LLC

An Alabama Limited Liability Company

Effective Date: [DATE]

ARTICLE I - FORMATION AND NAME

1.1 Formation

The Members hereby form a limited liability company (the "Company") pursuant to the Alabama Limited Liability Company Law of 2014, Ala. Code §§ 10A-5A-1.01 et seq. (the "Act") by filing a Certificate of Formation with the Alabama Secretary of State in accordance with Ala. Code § 10A-5A-2.01. This Agreement is the Company's "limited liability company agreement" within the meaning of Ala. Code § 10A-5A-1.02, and governs relations among the Members and between the Members and the Company as provided in Ala. Code § 10A-5A-1.08(a); to the extent this Agreement is silent on a matter, the Act governs.

1.2 Name

The name of the Company is [COMPANY NAME], LLC.

1.3 Principal Office

The principal office of the Company is located at:
[STREET ADDRESS]
[CITY], Alabama [ZIP CODE]

1.4 Registered Agent and Office

The registered agent and registered office of the Company in Alabama is:
Agent: [REGISTERED AGENT NAME]
Address: [REGISTERED OFFICE ADDRESS], Alabama [ZIP CODE]

1.5 Term

The Company shall have perpetual existence unless dissolved in accordance with this Agreement or the Act.

1.6 Series LLC Election (Optional)

Alabama permits a limited liability company to establish one or more series under Ala. Code §§ 10A-5A-11.01 et seq., each of which may have separate rights, powers, duties, business purposes, and members or managers, and, if the notice and record-keeping conditions of § 10A-5A-11.02 are satisfied, separate liability shielded from the debts and obligations of the Company and its other series.
☐ The Company is not organized as a series LLC.
☐ The Company is organized as a series LLC, and the terms governing each series are set forth in Exhibit C attached hereto.

ARTICLE II - PURPOSE AND POWERS

2.1 Purpose

The Company is formed for the purpose of:
[DESCRIBE BUSINESS PURPOSE]
and any other lawful business or activity for which a limited liability company may be organized under the Act.

2.2 Powers

The Company shall have all powers necessary, convenient, or incidental to accomplish its purposes as permitted by the Act.

ARTICLE III - MEMBERS AND MEMBERSHIP INTERESTS

3.1 Initial Members

The initial Members of the Company, their Capital Contributions, and their Percentage Interests are set forth in Exhibit A attached hereto.

3.2 Admission of Additional Members

Additional Members may be admitted only with the [unanimous consent / majority vote] of the existing Members and upon such terms as the Members determine.

3.3 Classes of Membership Interests

☐ The Company has a single class of membership interests.
☐ The Company has multiple classes of membership interests as set forth in Exhibit B.

ARTICLE IV - CAPITAL CONTRIBUTIONS

4.1 Initial Capital Contributions

Each Member has contributed or agrees to contribute the Capital Contribution set forth in Exhibit A.

4.2 Additional Capital Contributions

No Member shall be required to make additional Capital Contributions without such Member's consent. Additional contributions, if any, shall be made in proportion to Percentage Interests unless otherwise agreed in writing.

4.3 Capital Accounts

A separate Capital Account shall be maintained for each Member in accordance with Treasury Regulation § 1.704-1(b)(2)(iv).

4.4 No Interest on Capital

No Member shall be entitled to interest on any Capital Contribution.

4.5 Return of Capital

No Member shall have the right to withdraw or receive a return of any Capital Contribution except as provided in this Agreement.

ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS

5.1 Allocations of Profits and Losses

Profits and Losses shall be allocated to the Members in proportion to their Percentage Interests, unless otherwise required by the Code or Treasury Regulations.

5.2 Distributions

Distributions of Distributable Cash shall be made at such times and in such amounts as determined by the [Members / Managers], and shall be distributed to the Members in proportion to their Percentage Interests.

5.3 Tax Distributions

The Company shall distribute to each Member, at least annually, an amount sufficient to cover such Member's estimated income tax liability arising from the Company's income allocated to such Member.

5.4 Limitation on Distributions

No distribution shall be made if, after giving effect to the distribution, the Company would not be able to pay its debts as they become due in the ordinary course of business, or the Company's total assets would be less than its total liabilities.

ARTICLE VI - MANAGEMENT

6.1 Management Structure

☐ OPTION A - MEMBER-MANAGED

The Company shall be managed by its Members. Each Member shall have equal rights in the management and conduct of the Company's business, unless otherwise provided herein. Decisions requiring Member approval shall be made as follows:

• Ordinary business matters: [Majority / Unanimous] vote
• Extraordinary matters (merger, dissolution, sale of substantially all assets): [Majority / Unanimous] vote

☐ OPTION B - MANAGER-MANAGED

The Company shall be managed by one or more Managers. The initial Manager(s) shall be:
[MANAGER NAME(S)]

The Manager(s) shall have full authority to manage the business and affairs of the Company, subject to limitations set forth herein.

6.2 Officers

The [Members / Manager(s)] may appoint officers with such titles and duties as determined appropriate.

6.3 Actions Requiring Member Approval

Notwithstanding delegation to Managers, the following actions require approval of Members holding [a majority / two-thirds / unanimous] Percentage Interests:
(a) Amendment of this Agreement or the Certificate of Formation;
(b) Admission of new Members;
(c) Merger, conversion, or dissolution;
(d) Sale of all or substantially all Company assets;
(e) Incurrence of debt exceeding $[AMOUNT];
(f) [OTHER MATTERS].

6.4 Standard of Care

Under Ala. Code § 10A-5A-4.08, a Manager or Member who has authority to direct and oversee the activities and affairs of the Company owes the Company and the Members a duty of loyalty (to account for and hold as trustee any property, profit, or benefit derived from Company business or property; to refrain from dealing with the Company as an adverse party; and to refrain from competing with the Company before dissolution) and a duty of care limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law — Alabama law does not impose an ordinary-negligence or "prudent person" standard. Each such Manager or Member shall discharge these duties, and exercise any rights, consistently with the implied contractual covenant of good faith and fair dealing, which may not be eliminated by this Agreement. A Member who does not have authority to direct and oversee the Company's activities and affairs owes no fiduciary duty to the Company or the other Members solely by reason of being a Member, other than the implied covenant of good faith and fair dealing and the duty not to use Company information to the Company's detriment. Pursuant to Ala. Code § 10A-5A-1.08(b), the Members may expand, restrict, or eliminate the duties described in this Section 6.4 (other than the implied covenant of good faith and fair dealing) by written agreement: ☐ No modification. ☐ Modified as follows: [DESCRIBE MODIFICATION].

6.5 Compensation

[Members / Managers] [shall / shall not] be entitled to compensation for services rendered to the Company. [If compensation is permitted, describe terms.]

ARTICLE VII - MEETINGS AND VOTING

7.1 Meetings

Meetings of Members may be called by any Member upon [NUMBER] days' written notice. Meetings may be held in person, by telephone, or by video conference.

7.2 Quorum

A quorum shall consist of Members holding [a majority / two-thirds] of the Percentage Interests.

7.3 Voting

Each Member shall have voting rights in proportion to such Member's Percentage Interest. Members may vote in person, by proxy, or by written consent.

7.4 Action by Written Consent

Any action required or permitted to be taken at a meeting may be taken without a meeting if consented to in writing by Members holding the requisite Percentage Interests.

ARTICLE VIII - TRANSFERS OF MEMBERSHIP INTERESTS

8.1 Restrictions on Transfer

No Member may Transfer all or any portion of such Member's Membership Interest without the prior written consent of [a majority / all] of the other Members, except as provided herein.

8.2 Right of First Refusal

Before any Transfer to a third party, the selling Member shall offer the Membership Interest to the other Members on the same terms. The other Members shall have [30] days to accept.

8.3 Permitted Transfers

Notwithstanding Section 8.1, a Member may Transfer a Membership Interest to:
(a) A revocable trust for estate planning purposes;
(b) An Affiliate of such Member;
(c) A family member [define].

8.3A Transfer at Death

Pursuant to Ala. Code § 10A-5A-5.02(g), this Agreement may provide, and the Members elect as follows, that a Member's transferable interest may be transferred, in whole or in part, with or without consideration, to one or more designated persons at the death of the Member, subject to any outstanding charging order under Ala. Code § 10A-5A-5.03 and to the rights of the Company's and the Member's creditors:
☐ Not elected; a deceased Member's transferable interest passes as provided in Section 8.1 and applicable law.
☐ Elected, as follows: [DESCRIBE TRANSFER-ON-DEATH TERMS AND DESIGNATED TRANSFEREE(S)].

8.4 Effect of Transfer

A Transferee shall become a Substitute Member only upon compliance with this Article VIII and execution of a counterpart to this Agreement.

ARTICLE IX - DISSOLUTION AND WINDING UP

9.1 Dissolution Events

Under Ala. Code § 10A-5A-7.01, the Company is dissolved and its affairs shall be wound up upon the first to occur of:
(a) An event or circumstance specified in this Agreement as causing dissolution;
(b) The written consent of all Members (the statutory default under § 10A-5A-7.01(b); the Members may instead adopt a different threshold in this Agreement: ☐ All Members (statutory default). ☐ Members holding [___]% of the Percentage Interests.);
(c) The dissociation of the last remaining Member, unless the holders of all transferable interests agree in writing within 90 days to continue the Company and appoint one or more new Members, or the Members do so in the manner stated in this Agreement;
(d) Entry of a judicial decree of dissolution under Ala. Code § 10A-5A-7.01(d) on the grounds that it is not reasonably practicable to carry on the Company's activities and affairs in conformity with this Agreement.

9.2 Winding Up

Upon dissolution, the [Members / Managers] shall wind up the Company's affairs, liquidate assets, pay creditors, and distribute the remaining proceeds to Members in accordance with Ala. Code § 10A-5A-7.06 and their Capital Account balances.

9.3 Post-Dissolution Filing

Alabama law does not require the Company to file a statement or certificate of dissolution with the Secretary of State in order to complete winding up, retain, or obtain the Company's name. Ala. Code § 10A-5A-7.09(c). The Members may elect to file Articles of Dissolution with the Alabama Secretary of State as a discretionary administrative step to formally close the Company's registration and tax accounts.

ARTICLE X - INDEMNIFICATION AND LIABILITY

10.1 Limitation of Liability

No Member or Manager shall be personally liable for the debts, obligations, or liabilities of the Company, whether arising in contract, tort, or otherwise, solely by reason of being a Member or Manager.

10.2 Indemnification

The Company shall indemnify and hold harmless each Member and Manager from any claims, liabilities, damages, and expenses (including reasonable attorney's fees) arising from actions taken in good faith on behalf of the Company, to the fullest extent permitted by the Act.

10.3 Insurance

The Company may purchase insurance on behalf of any Member, Manager, or agent against liabilities arising from their Company roles.

10.4 Charging Order

Pursuant to Ala. Code § 10A-5A-5.03, a charging order against a Member's transferable interest in the Company is the sole and exclusive remedy by which a judgment creditor of a Member may satisfy a judgment out of the Member's transferable interest in the Company. A judgment creditor has no right to foreclose on the charging order or the Member's transferable interest, and no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Company.

ARTICLE XI - TAX MATTERS

11.1 Tax Classification

The Company shall be classified for federal income tax purposes as:
☐ A partnership (multi-member) or disregarded entity (single-member)
☐ An S corporation (upon election)
☐ A C corporation (upon election)

11.2 Tax Matters Partner/Partnership Representative

[MEMBER NAME] shall serve as the Partnership Representative for purposes of the Bipartisan Budget Act of 2015 and any corresponding state provisions.

11.3 Tax Returns

The Company shall prepare and file all required federal, state, and local tax returns and shall provide each Member with Schedule K-1 or other required information.

ARTICLE XII - BOOKS AND RECORDS

12.1 Maintenance of Records

The Company shall maintain at its principal office:
(a) A current list of Members with addresses and Percentage Interests;
(b) Copies of tax returns for the past three years;
(c) Copies of this Agreement and any amendments;
(d) Financial statements.

12.2 Member Access

Each Member shall have the right to inspect and copy Company records during ordinary business hours upon reasonable notice.

ARTICLE XIII - MISCELLANEOUS

13.1 Entire Agreement

This Agreement constitutes the entire agreement among the Members and supersedes all prior agreements.

13.2 Amendments

This Agreement may be amended only by written instrument signed by Members holding [a majority / all] Percentage Interests.

13.3 Governing Law

This Agreement shall be governed by the laws of the State of Alabama, without regard to conflicts of law principles.

13.4 Severability

If any provision is held invalid, the remaining provisions shall continue in effect.

13.5 Counterparts; Electronic Signatures

This Agreement may be executed in counterparts, each of which shall be deemed an original. Pursuant to the Alabama Uniform Electronic Transactions Act, Ala. Code § 8-1A-7, an electronic signature satisfies any requirement that this Agreement be signed, and this Agreement may not be denied legal effect or enforceability solely because it was signed or transmitted in electronic form, provided the Members have agreed to conduct the transaction by electronic means as provided in Ala. Code § 8-1A-5.

13.6 Notices

All notices shall be in writing and delivered to the addresses set forth in Exhibit A.

EXECUTION

The undersigned Members execute this Operating Agreement as of the Effective Date.

MEMBERS:

______________________________
[MEMBER 1 NAME]
Date: ______________

______________________________
[MEMBER 2 NAME]
Date: ______________

[Add signature blocks for additional Members]

EXHIBIT A - MEMBERS, CONTRIBUTIONS, AND PERCENTAGE INTERESTS

EXHIBIT C - SERIES TERMS (IF APPLICABLE)

This Operating Agreement is intended to comply with the Alabama Limited Liability Company Law of 2014, Ala. Code §§ 10A-5A-1.01 et seq., as amended. Consult a licensed Alabama attorney before use.